The iPhone and AAPL

Let’s look at a rundown of the good and bad comments about Apple’s iPhone, gleaned from dozens of reviews.

First, the good:

  • It’s a gorgeous design, slim, sleek, and scratch resistant.
  • Its innovative finger-touch interface works well.
  • It combines a cell phone with iPod music and video playback.
  • It sports the largest high-res screen on the market.
  • It can operate on Wi-Fi wireless networks.
  • It’s the first phone with a real internet browser.

Now, the bad:

  • It costs as much as a small car. Not really, but it’s very expensive. The entry model with 4GB is $500. The deluxe with 8GB is $600.
  • It operates only on AT&T;’s cellular network, which stinks. Consumer Reports says AT&T;’s signal strength is last or next to last in 19 out of 20 big cities. The iPhone’s web browsing capability uses AT&T;’s EDGE platform, which is even worse than its cell network. How Apple could have chosen the worst possible partner for its beautiful new device is a mystery, but it’s locked into an exclusive agreement for the next two years for sure, possibly the next five. Somebody really blew it.
  • The cost of the cell service is $60 for 450 minutes, $80 for 900 minutes, and $220 for 6,000 minutes (who the heck is that for?). These iPhone plans run about $20 per month more than competing Blackberry plans. The minimum sign-up period is 24 months, so that adds $480 to your costs over a two-year period. If you thought you’d be able to use free VoIP (Voice over Internet Protocol), think again. The iPhone can’t.
  • Add the cost of a 4GB iPhone to the cost of upgrading your existing cell phone plan to the iPhone’s plan, then toss in the $200 or so it can cost to cancel your existing cell phone contract, and you’re looking at a $1,000 minimum to become an iPhoner.
  • Oddly, the iPhone can’t download songs or podcasts over the cell network or Wi-Fi. You need to first connect the iPhone to your computer and then download through your iTunes account. That’s not mobile at all. While your friends are sitting in cafes downloading talk shows, headlines, and new hits, you’ll be sitting with your cool iPhone scrolling through only the files already on it.

This first iteration of the iPhone is crippled by its dependence on AT&T.; The second or third generation will be free of that, and it looks worth waiting before shelling out the kind of money needed to jump onboard the iBandWagon.

There’s the rundown on the phone. The question for investors becomes, Will the iPhone live up to Wall Street’s expectations?

In the short term, I doubt it.

At the low end, UBS projects that Apple will sell 950,000 units by the end of September and 8.1 million by the end of September 2008. At the high end, Credit Suisse projects 1.7 million and 12.3 million units sold in the same time frames.

Those are astronomical projections. The wildly successful iPod itself sold just 10 million units in its first three years. Yet, the iPhone is projected to sell that many in a little over one year?

Even Microsoft’s XBox 360, which costs just $400, sold only 1.5 million units in its first quarter, and that was worldwide, not just in the U.S. like the iPhone. The XBox has been for sale around the world for seven quarters now, and has sold just 12 million units.

I find it hard to believe that the iPhone will live up to expectations. With shares of Apple having risen 44% this year in anticipation of the iPhone’s release, the stock looks vulnerable to a sell-off.

With the stock over $130, I’m eyeing it as a possible short. Your thoughts?

This entry was posted in Uncategorized and tagged . Bookmark the permalink. Both comments and trackbacks are currently closed.
  • The Kelly Letter
    A Complete Investment Management System
    The Kelly Letter  every Sunday morning by email.
    Like no other. Many subscribers say this is the best read of their week, astonishing in its ability to distill seven days of noise into one succinct overview of the very few items that might matter. Start your Sundays right!
    A one-page Quick Start Guide
    with page number references to full information in The 3% Signal. You'll receive access to this right away so you can begin transforming your portfolio into a performance machine immediately.
    The 3Sig Calculator.
    A thing of beauty! You'll use it to generate your own personal signals every quarter including exact share amounts to buy and sell based on your account balances. It emails you the results to make later quarters easy by keeping last quarter's numbers at your fingertips. Some subscribers say this tool alone justifies their subscription price.
    The subscriber-only section of this website
    where likeminded investors are commenting on notes and discussing in forums. Jason joins these interactions every day. They're a treasure trove of investing tips and wisdom.
    The archive of Kelly Letter notes.
    It’s a research center, searchable and smartly tagged to make gathering time-stamped material on covered subjects easy.
    The subscriber podcast.
    Jason reads every letter word-for-word. This feature was requested by subscribers who prefer audio learning. They listen on their Monday morning commute, during a workout, or while reading along at their computer.

    Save 17%

    Pay as you go
    Or sign up to receive free email and learn more about the system.
Bestselling Financial Author