Technology Stocks: The Allure of the Apple iPhone
By Ann Sosnowski
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Technology Stocks: The Allure of the Apple iPhone
by Ann Sosnowski, Editor-in-Chief, Diligent Investor
I admit I enjoy ogling new technology: MP3 players, cameras and cellphones laid out in storefront windows, beaming in fluorescent lights, displayed like lollipops in a grownups’ candy store.
I also admit to certain neo-Luddite sensibilities: Shouldn't we all worry more about how to survive on as little as possible instead of making agonizing decisions over which pink iPod cover matches my new Coach bag?
Plus, I’m extremely clumsy, and if there’s something I can break, I’ll find a way to do it. Take for instance, the iPod that I received as a gift a few years ago. After only a few days, my play button became stuck, courtesy of what my friends and parents call “a heavy hand.” I couldn’t use my iPod for a year, until I finally managed to get the click-wheel unhinged from whatever was holding it hostage.
Nature or nurture? Given said "heavy hand," I was always told as a child that if it isn’t mine, I shouldn’t touch it if the object had more than a few buttons -- especially if I couldn’t afford to buy it once I broke it.
I learned that lesson early on after a gift swap in fifth grade. My friend received purple shiny earrings. I was so dazzled I simply had to touch them. As soon as I did, rubbing them between my palms and admiring their sparkle, the earrings fell apart. I put them back in the box and ran to the bathroom to hide and cry for a half an hour. Soon the teacher found me, pulled me out of the stall and forced me to apologize to my friend… and pay for the earrings I had broken.
So pardon me when I admit that I won't be touching the new Apple iPhone, especially considering its price tag of $499 per unit.
But that doesn’t keep me from really, really wanting one, even though I probably wouldn’t know what to do with it. And it doesn’t keep me from ogling its curves and assets every time the commercial for Apple’s next blockbuster product comes on the television.
Apple Inc. (AAPL:NASDAQ) has already ridden the success of its mini and shuffle iPods for over the last two years. When Steve Jobs unveiled the Apple iPhone at the last Consumer Electronics Show in Las Vegas, Apple stock jumped 12% in only two days, past the $100 mark. Currently trading for $120 per share, my estimates are that the company could see $150 per share (at least) on the stock by Christmas if sales figures are good. And why wouldn’t they be?
Apple’s iPhone will start selling on June 29. People are already lining up outside of stores for first dibs on the most anticipated “toy” of the year. Although the phones themselves will be expensive ($499 for a 4 GB model and $599 for an 8 GB model), the phone plans courtesy of AT&T Inc. (T:NYSE) aren’t much more than what you pay for your current phone service. For $59.99, you can have unlimited data service, 200 text messages, rollover minutes, unlimited mobile-to-mobile calling, as well as the first visual voicemail service.
The prediction is that there will be 10 million iPhones in consumers’ hands by 2008.
Not only is Apple stock going to continue to move upward as the leading tech company of this decade, but so is AT&T’s stock. The company that recently acquired Cingular Wireless customers has a stock lowly priced at $39.29 per share. While Apple stock has risen 212% over the last two years, AT&T stock has gained about 63% during the same.
The reason people buy cars these days is the dazzle: The satellite radio systems and GPS. Forget about horsepower and torque and the smooth ride. The iPhone is very similar: No matter how it “drives,” the bells and whistles, including “real” Internet, will rope in plenty of customers.
The only person I know that isn’t secretly dreaming of buying an iPhone is a close friend of mine involved in the intellectual pursuit of pursuing first amendment rights in our technological age. He’s currently a supporter of the EFF, or Electronic Frontier Foundation.
I received a little note from him today after I expressed for the third time how awed I am by the new contraption:
“I can't think of any gadget right now that I'm more annoyed to hear about. It's not a revolutionary device; it's just well marketed. Something that polished this functionality was coming eventually, be it from Apple or someone else. Other products have done many of the same things for some time. Hell, I've had a phone that can play music and video for more than three years now, I just don't use it for such because battery technology still can't keep up and so you end up needing a separate device to play music/video anyway so that you still have some battery life left to actually use the phone when you need it.
“In all fairness, it's a very attractive device but it's just a polished revision of a slew of other phones (Sidekick? Windows Mobile phones?) with an experimental (as far as the mass consumer market is concerned) screen. It's not a revolutionary device; it's good marketing of a device that's the next logical step (and a relatively small one at that) in the direction that device development has been moving for sometime. If anything, Apple mostly deserves credit for their marketing skills. They're building a market for device functionality that's been available for years but has remained a niche market due to limitations. Apple does a better job than most at convincing people they need technologies that they didn't even know they wanted when other people were selling it.”
Well, that’s all I needed. Here at Taipan Financial News, we’re in the business of understanding what the mass market wants, and what companies will profit from it.
While there are times to be ideological, the bottom line is that people want, even yearn, for Apple’s newest product… and with the sales, both Apple’s and AT&T’s stock will rise. And investing in either (or both) is still a good idea.
As for me, since I’m not allowed to touch it, I’ll be staring at the pretty, shiny thing from afar.
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