Adobe Should Profit From iPhone; Apple Should From Cisco's Lawsuit

Includes: AAPL, ADBE, CSCO
by: William Trent, CFA

Apple’s (NASDAQ:AAPL) iPhone managed to impress most industry watchers despite the relentless hype buildup, which is quite an accomplishment in and of itself. Enough has been said on this that we thought we would present some of the best of it from around the web.

The iPhone’s amazing margins (Business Week):

I called David Carey, president of Portelligent, which does competitive technical intelligence–another way of saying it tears down products and then advises clients on their costs and likely gross margins. He says the iPhone is looking like a major money maker, on a per unit basis. “It will have very good margins,” says Carey, who has yet to try to come up with an exact figure. “They’ll end up being among the best in the [cell-phone] business.”That’s despite paying up for some of the most expensive components. He says Apple will have likely pay $50 or so for that slick new display–quite a bit more than lower-res screens, that don’t have the touchscreen controller that will set the iPhone apart from keypad-based phones. And all the storage in the iPhone will cost money, too. The storage will cost $30-35 for the 4-gig unit, or $60-70 for the 8-gig model, he figures.

But then, there’s plenty of costs the iPhone won’t have. Apple has already amortized the Mac software on which it runs, and that software interface means there’s no need for a keypad or on-off buttons and such. also thinks the iPhone will be good news for Adobe (NASDAQ:ADBE):

The new device is likely to kick off a mobile-content arms race among carriers, and Adobe is well-positioned to supply some of the ammo. Here’s why:

Adobe, which snapped up Macromedia at the end of 2005, has already established a strong beachhead in the telephony world via a deal with Japanese telco giant NTT DoCoMo (DCM). A compact version of Macromedia’s flash multimedia player, called Flash Light, is now on millions of phones in Japan. What’s more, DoCoMo is using a server version of the player, called FlashCast, to push content to the company’s “ichannels,” which include news, sports, weather and so on.

Every time a Japanese consumer hits an ichannel, Adobe collects a bit of revenue.

PBS Commentator Robert Cringely thinks the Cisco (NASDAQ:CSCO) suit over the name was a clever trap designed for publicity.

Cisco’s trademark infringement lawsuit, as well as its recent introduction of new iPhone models, shows the company has no intention of giving up the iPhone trademark to Apple. And since Cisco has a prior claim, just as many lawyers, and more money than Apple, one can only guess that Cisco will prevail. So why did Apple start this fight in the first place? Publicity.

Apple already has a fallback position created by the iTV-to-Apple TV transformation, so I’m guessing that sometime soon Apple will either pay Cisco a LOT of money for the name or Apple’s iPhone will be transformed into the Apple Phone. Either way, every mobile phone user on Earth will have heard that Apple is now in the mobile phone business. Very clever.

Finally, Digit Online tells us hackers are salivating over the iPhone too.

Technology fetishists aren’t the only people itching to get their hands on an iPhone. Hackers want to play with Apple’s new toy, too.

With the anticipated shortages, hopefully it will be a while before the hackers get their hands on one.