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Fortune on the Battle for our livingrooms
Steve Jobs owns your living room
Investors think there is a battle raging for control of the digital home.
They're wrong -- Apple has already won.
By Fred Vogelstein, FORTUNE senior writer
January 27, 2006: 11:12 AM EST
NEW YORK (FORTUNE) - On Wednesday night, Gene Munster was thinking about going to the movies; but he did something else instead. He spent $1.99 to watch a campy 1960s TV show on his laptop. The first season of the Munsters -- a comedy about a family of monsters and their struggles to lead an all-American life -- was available for download on iTunes. Munster, for obvious reasons, couldn't resist.
The experience reaffirmed something for Piper Jaffray's Apple Computer analyst as he pondered the impact of Disney's plans to buy Pixar (Research) -- Apple CEO Steve Jobs' other company: Most investors think there is a battle raging for control of the digital home, pitting the cable companies, the phone companies, Google, Apple, Yahoo (Research), Microsoft (Research) and the entire consumer electronics industry against one another in a fight to the death. They're wrong. In Munster's view, Apple has already won.
It already is the defacto front end for our digital music experience, making it easy to listen on our iPod, computer speakers and increasingly our home stereo. Now, he says, with the access Apple will no doubt get to Disney (Research)'s vast library of movies and TV shows, iTunes is about to get a huge boost toward becoming the front end for our digital TV and movie experience too.
"What happens when you can beam shows from your computer or iPod wirelessly to your TV?" he asks. "You have a Tivo (and a music player) that you can take anywhere." IPods and TVs don't have that ability yet but they will soon, he believes. "iTunes will be the software that runs your living room."
It's tempting to dismiss Munster as just another analyst touting the stock he covers. (Apple (Research) is up 87 cents to $73.20 today and has doubled in the last six months.) There are so many new relationships being formed right now between technology and entertainment companies that it seems too early to call a winner. CBS just announced a huge deal to distribute big chunks of its television library on Google (Research), for example. Microsoft just announced a music deal with MTV and is working with AT&T (Research) (formerly SBC) on an Internet TV offering. And cable companies increasingly are starting to offer video-on-demand services and Tivo-like record and playback functions in their set top boxes.
Indeed, it's not even clear yet that there will be that much to watch, at least legally. Most of Hollywood is still decidedly hostile to the idea of distributing anything over the Internet. Jobs and Disney CEO Bob Iger may have grand plans. But the theatre chains and retailers like Wal-Mart (Research) that distribute studios' DVDs hate the idea; and they still account for virtually all of the studios' profits.
True enough. But the new partnerships are all incomplete solutions. Right now you can't research, download, organize and listen/watch music and TV shows at home or on the road with anything else but iTunes. Meanwhile, its lead as the Windows of digital entertainment is only growing. Despite a raft of challenges last year, including a very credible push by Yahoo, the iPod and by extension, Apple and iTunes, had its biggest year ever. Thirty two million of the 42 million iPods ever sold were sold in 2005.
Even competitors privately acknowledge that in online music, at least, iTunes has almost unstoppable Microsoft/Ebay-like network effects. With, by Munster's count, 50 million copies in circulation and songs now selling at a rate of 1 million a day, artists, labels and advertisers want to be on iTunes because everyone else is on iTunes.
As for getting enough movies and TV shows on iTunes to rival the draw of the music, Munster says that when entire library of Disney movies and television shows is available there, "that will be a big enough slug of content to create a domino effect."
Still skeptical? Talk to Jeff Zucker, the new CEO of NBC/Universal. In an interview with Newsweek he said that iTunes had generated $2.5 million in download revenues just in the last three months. He also said it was helping him decide what to air. Because of the unexpected popularity of one show, "The Office," on iTunes, TV viewership shot up and it won a coveted Thursday night prime time slot.
The one catch for Apple, of course, is that being the control panel of our digital entertainment experience is not in itself a business right now. It might become one if Jobs can translate all the eyeballs he has into significant online advertising dollars. But at the moment, iTunes' main function is to drive hardware sales -- be they iPods, Macs or any other device Jobs has up his sleeve, like as many believe, a PVR.
At the moment, Apple makes no more than a few pennies on the music and videos it sells through iTunes. This puts Jobs in territory that has not been charted for a while -- making 20 percent margins in what is in effect, consumer electronics -- a business that for a long time has come to expect single digit margins.
But his critics have been leveling that broadside every year for the past four, and he has proven them wrong at every turn. It's becoming hard to bet against a track record like that.
http://money.cnn.com/2006/01/27/technology/pluggedin_fortune/index.htm
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Dill what about mrvl's PE of 76.35 kinda high ?
Checkout BRCM and MRVL ?
Snow White: Good Apple's or Bad ?
KCMW, IMHO, it comes down to blind faith in Apple and Steve Jobs to keep producing and evolving their product and services. For some of us on this board ... that just won't do. One big mistake and AAPL's share price could plummet by Half. On the plus side Steve Jobs has made an incredible deal for Pixar that could create a new Synergy for both Apple and Disney. If the iPod and Video market takes off like Apple's Music biz has everyone of the Major media conglomerates will be looking to capitalize on this new revenue stream. If the Media conglomerates take the easy route Apple will capture the lionshare of the Video downloading business if they decide to partner with a rival platform the Video Download wars will be on. Someone mentioned Sony awhile back I wouldn't real them out just yet. Microsoft has the potential and the resources to easily rival Apple's effort in the Video downloads business it just lacks the charismatic leadership of a Steve Jobs to rally the troops.
-Alt
MacIntel: Rosetta is faster than a G4
Thu, 26 Jan 2006 13:07 EST
The fellow over at Nakfull Propaganda got hold of an iMac Core Duo 1.83GHz last week and ran some loose benchmarks on the unit as compared to a Power Mac dual G5 2.5GHz and a PowerBook G4 1.67GHz. While the specifics can be seen in the original posting, the nice take-away is that apps running under Rosetta, Apple's PowerPC emulation layer that's part of Mac OS X for Intel, are generally faster than they are when running native on a G4.
This is happy news, indeed, as much will need to run under Rosetta here at the beginning of the Intel transition. Originally, many were concerned about Rosetta's potential performance, given that it started out as a G3 emulator that ignored the G4/G5's AltiVec instruction set. The release of Mac OS X v10.4.3, however, brought a much improved Rosetta, offering full G4 emulation, including AltiVec.
http://www.maconintel.com/news.php?article=112
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Motley Fools Take on Apple
They seem as puzzled about Apple as this board does.
-Alt
2006: Year of the Apple?
By Alyce Lomax (TMF Lomax)
January 26, 2006
The first things I look for in a potential investment are a great brand, lots of cash and little or no debt, the vision to capitalize off current social trends, and the potential for high growth. When I was asked a few months back to participate in the Fool's forward-looking stock tome Stocks 2006, I found all those in concert in a retailer that has great prospects for the years ahead.
But the retailer in question wasn't the only stock with such characteristics, of course. There is, after all, a high-growth superstock that embodies those attributes: a great brand built to capitalize off consumer trends, generating cash without taking on excessive debt. Indeed, it's on just about everybody's minds these days -- the public's (and investors') fandom is borderline obsessive these days. So, in keeping with the search for high growth, there was always an old idea -- Apple (Nasdaq: AAPL). I've had mixed feelings about the stock (not the company) for the past two years, but given recent momentum, it was difficult to ignore this amazing story.
Of course, Apple's recent share price seemed ridiculous. However, the more I mulled it, the more I thought that while it was plenty risky, maybe -- just maybe -- it wasn't such a crazy thought after all. Let's consider this a little further.
Choking on Apple's price?
Over the past year, Apple shares have just about doubled, and a surge in holiday iPod sales caused more euphoria. Apple currently trades at 39 times trailing-12-month earnings. Yes, I know: Apple's been trading at high multiples for quite some time, and just look at how the stock has performed. But Foolish colleague Nathan Parmelee recently performed a discounted cash flow calculation on Apple shares and didn't see much (if any) upside in the company's shares.
Still, there's a lot to like. Apple's compound annual growth rate in sales and net income over the past two years has been 55% and 239%, respectively. In the first quarter of 2006 -- the hopping holiday quarter -- that astounding growth continued. Apple's earnings nearly doubled on a year-over-year basis, while revenues increased 65%. Although Apple gave a lower forecast than many expected, it's known for conservative guidance.
Apple carries a large amount of cash on its balance sheet, with no debt. In its more troubled times, it always had cash to fall back on. At the current $8.7 billion, Apple has about $10 per share. (Of course, many Fools can and do often opine on the subject of Apple's share dilution.)
Sure, Apple's growth rates can justify some of the simpler valuation metrics. The question is whether such growth is sustainable far into the future, and that's where things get tricky. At what point will Apple's shares go rotten when growth stalls? Will investors know when to admit that its go-go days are done?
So many recipes
Why are so many investors upbeat? There's still the possibility (a good one, in my opinion) that many iPod users will switch to Mac computers. Last quarter, Apple said that more than 45% of the customers buying computers in its stores are new to Mac. And the switch to Intel (Nasdaq: INTC) chips in new Macs -- available six months sooner than previously anticipated -- should allow the company to capitalize off its powerful tailwinds at the moment by marketing faster, more powerful Macs.
Apple's retail stores haven't nearly reached saturation, and if you've been to one lately, you've probably seen for yourself what an "experience" it can be. Last quarter, $1 billion of the company's $5.7 billion in sales came from Apple retail stores.
IDC recently said that 106 million MP3 players will be purchased in 2006; at the moment, the iPod owns 70% of the market. Obviously, a big part of Apple's future relies on the iPod's continued dominance, since it's significantly polished the Apple brand and spurred a possible "halo effect" of increased Mac sales. There are plenty of high-powered rivals who want a piece of the MP3 player market; Sony (NYSE: SNE), Dell (Nasdaq: DELL), and Creative (Nasdaq: CREAF) have competing MP3 players, and they're drooling over the opportunity to woo consumers.
Last, there are the issues of whether Apple can attract new users to buy iPods and convince existing iPod owners to upgrade. It's quite possible that many existing iPod owners won't be willing to shell out yet another $400, again and again, for the latest model. (And how long will Apple be able to add must-have innovations to each new model?)
The answer is ... there is no answer
All right, so here's my final answer about Apple as an investment right now: I don't know. I certainly don't want to go on record saying, "Don't buy Apple." I am impressed -- the company has proved bears wrong for several years now while the iPod became an absolutely amazing phenomenon. However, it just seems nearly impossible to extrapolate what future growth rates will be.
A lot of things have to go right. As far as I can tell, to justify its valuation well into the future, Apple needs:
Lasting domination of the MP3 player market
Continued and increased migration to Mac computers
iPod owners' forgiveness of a swift product upgrade cycle
Consumers' persistent ambivalence to competing MP3 player offerings
Expansion of the Apple retail store base
It also goes without saying that Apple needs to keep innovating and evolving.
In other words, a lot of things have to go right, and not many can go wrong. And of course, at some point, what's known as the law of large numbers is going to kick in (it always does). That's why I couldn't pull the trigger on Apple as my Stocks 2006 recommendation. There are plenty of risks investors need to be aware of -- maybe now more than ever.
For now, I'll keep on loving Apple the iPod Innovator. As for Apple the Stock? It's been a great story thus far -- one that I look forward to watching as 2006 unfolds.
http://www.fool.com/news/commentary/2006/commentary06012618.htm?source=eptyholnk303100&logvisit=...
No way Daddy-Oh.
El-Steve-O is working on more iPod/iVideo Mojo thanks to Pixar and the house of Mouse.
-Alt
.... M...IC.... KEY ... M.O.U.S.E.
WLD, I'm a little bit more concerned that Jobs may lose Apple in a High steaks poker game those Movie Moguls play fast and loose with other peoples cash.
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No way dude ....
Didn't you all get the memo - January 26th is Talk like a Hippie day.
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Righteous Dude !!!!!
Bootz hold off until April 1st.
Jobs will deliver something befitting AAPL's 30 Year anniversary.
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Roni, Those Groovy Man !!! days are long gone man !!!
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Hey Bootz
We all know that Jobs is an idjiat.
Did you sell the bulk of your AAPL shares ?
-Alt
AAPL Strudel
Tarmar I completely agree with your strategy on AAPL as a longterm play. The Turtle and the Hare is an excellent analogy to those who time the market and those that don't.
Timing the market is difficult if not impossible unless you are a Seventh Son of a Seventh Son with psychic ability.
-Alt
Mickey AAPL Mouse
Bought 100 shares of DIS
Bullish on DIS long term .... Short term it doesn't look good.
-Alt
looks like a buying opportunity to me.eom
Mickey and Buzz redux
That Steve Jobs is sure crazy .... Crazy like a Fox that is.
Interesting analysis of what the Disney/Pixar merger means for Apple.
Tuesday, January 24, 2006
What Disney acquiring Pixar means
It's all over but the paper signing. Business Week says that Disney's board has approved its takeover of Pixar, which will make Steve Jobs the largest stockholder of Disney as a side effect. This sounds like a simple merger and acquisition story, but it actually reshapes the tech and TV businesses. How? Here's our view of what this deal really means:
Disney regains its crown as an animation powerhouse. No studio has ever achieved six blockbuster movie hits in a row before Pixar. With Pixar on board, Disney can now add Monster's Inc. and Toy Story to its existing stable of classic movies such as Snow White and Beauty and the Beast.
Apple gains a gold-plated Fortune 100 customer. Expect Disney to start becoming the biggest buyer of Apple MacBooks and PowerMacs in the country. Why? Imagine being in a board meeting with Steve Jobs, watching the largest shareholder pull out his MacBook to take notes while you pull out your Dell. At least some board members will decide they need a new laptop. And once executives in the boardroom start using Macs, it won't be long before Apples are on the approved computer list.
iTunes garners access to serious video content. The trickle of iTunes TV shows that started with Desperate Housewives and Lost will grow to a flood this year as new iTunes revenue turns skeptics to converts. As Apple begins creating its own on-demand TV network, Disney will rapidly become the preferred distribution studio because of its deep connection to iTunes.
Apple gets serious influence in Hollywood. Unlike when Steve Jobs negotiated for rights to distribute music as an outsider, Jobs will now be a peer in Hollywood. When Jobs weighs in on anything from next-generation DVD formats to what digital rights management technology, he'll now be able to drive deals and standards that an outsider never would be able to pull off.
With Jobs and Disney CEO Robert Iger joined at the hip, the days when Hollywood could just stonewall a new technology like iPods or dictate distribution terms for movies are over. Steve Jobs' relationship with Disney is now a trump card in his hand. For players in both Silicon Valley and Hollywood, that means it's now a whole different game.
http://www.blackfriarsinc.com/blog/2006/01/what-disney-acquiring-pixar-means.html
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Linda this is a serious offer .... if I don't buy the shares from you I will be buying Disney on dips.
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ljk i'll even negotiate some sort of premium for the shares if need be.
-Alt
Mickey and Buzz together again
Linda with John Lassateer given creative rein at Disney he and Steve Jobs will reinvigorate Disney into a creative dynamo .... willing to take risks not unlike its founder Walt Disney.
It was Michael Eisner who destroyed the creative side of Disney by shutting down all of its domestic animation facilities in favor of Disney Cruise ships and merchandising that has reached absurd proportions.
If you have no faith in the merger sell your shares to me.
-Alt
Thats a fact jack.eom
10% discount off of iLife or iWork at Amazon.com
OT: HYGS did well today as well.eom
Good day to sell them AAPL's.eom
AAPL PIXR and DIS up in Pre-Market.
Spectacular iTunes Results
Checkout the really young demographic info.
-Alt
iTunes usage rockets 241%
Sunday, January 22, 2006 at 11:25 by Kathleen Hill
Nielsen//NetRatings, a leader in Internet media and market research, have announced that traffic to Apple's iTunes web site and use of the iTunes application has skyrocketed 241% over the past year, from 6.1 million unique visitors in December 2004 to 20.7 million in December 2005, reaching nearly 14% of the active Internet population.
Teens are disproportionately represented among iTunes users; 12 to 17 year olds are nearly twice as likely to visit the iTunes Web site and use the application as the average Internet user. iTunes users are also more likely to be male; the site's traffic is 54% male and 46% female.
Jon Gibs, director of media analytics, Nielsen//NetRatings said,
"The rapid growth of iTunes is an important phenomenon in the online media marketplace. Consumers have clearly indicated that they are eager to control their own music libraries, one song at a time."
Nielsen//NetRatings also revealed that iTunes users form a distinct target audience with identifiable brand preferences. Their favorite car make is Volkswagen, which they are 2.2 times more likely to own than the average Internet user. Other popular car makers among the group include Audi and Subaru. In terms of beverages, their alcohol of choice is hard cider, followed by imported and domestic beer.
iTunes users also have decided media preferences. Among magazines, they are 3.3 times more likely than average to read Wired, 2.6 times more likely to read Rolling Stone and 2.5 times more likely to read FHM. When watching television, they flock to the Cartoon Network at 1.4 times the average rate, and to HBO and BBC America at 1.3 and 1.2 times the average rate, respectively.
Jon Gibs added,
"As networks begin to decide what types of programs to either produce or distribute through iTunes video, they should match the TV audiences' offline purchase and media consumption behaviour with that of the iTunes users to maximize the success of video downloads."
http://itvibe.com/news/3872/
Mr JOBS and the House of Mouse
Well as langostino would say:
Steve Jobs is an idjiat
Zanny would .. Say
Its Happening !!!!
I say Go AAPL !!!!!!
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Hey Dual ..... Bootz .... Chill
Linda has had a tough week like most of us have .... You could put her on ignore if she's bugs you that much.
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Disney takeover of Pixar
It isn't a done deal just yet nor do we even know what Disney is proposing for the stock swap. What if its a 2 for 1 stock swap and Disney share price doubles ? If this newsweek article is spot on John Lasseter will still have creative control over the Pixar animation unit.
http://msnbc.msn.com/id/10966807/site/newsweek/
Having some control over Disney/ABC will go along way to helping Apple in the Video business.
-Alt ....
I have no stake in Pixar so I wish you the best of luck on the outcome.
Dill don't get suckered into
believing stereotypes.
.... people are more complex than that.
-Alt ..... Gooooo AAAAPPPPPLLLLL !!!!!!!!
Win I agree with you
and this Dis/Pixar take over is timed to perfection.
Jobs' "pre-announcing the positive" jacked the stock price UP, not down.
-Alt
Perceptions in the market
I've learned along time ago not to get emotionally attached to any particular stock or company. I still believe that Apple has alot of potential upside in the long run but if your dealing with short term risk then watch out, the current market has the potential of getting pretty ugly very quickly in the short term. The equity market is psychologically driven and not as closely related to true economic realties until overwheming evidence changes the markets perception on a stock or an economic trend. Apple has lots of positive mindshare and this perception gives it an edge. The old joke about Jobs Reality Distortion field is really the publics perception of what AAPL is all about and what it is worth. Example: When this board was discussing BRST positive posts helped to drive it up and negative posts helped to lower its value. The whole market is driven this way to some extent.
Best Always,
-Alt
Clear, What happens next depends on alot of things.
If you are investing with dollars you may need next Tuesday then get out and invest in more conservative vehicles like US Treasury Notes or Bonds.
I invest in dollars that I will not need for at least a decade so I'm staying pretty much pat with my Tech investments in which AAPL is my primary holding.
Roni's investment strategy in the Energy and Metals sector looks like a pretty good strategy as well.
If our economy continues to weaken it could be a very tough time for our equity markets in general. If energy prices continue upward expect our markets to weaken further. If the Real Estate market pops then we could have a very long and prolonged recession. That would also signal an opportunity to buy Real Estate .... if you have the cash.
But above all get other peoples opinions from this board and formulate your own Investment strategy. We have a great many Savvy investors on this board.
Best Always,
-Alt
Hey Linda, If you play this long and don't panic you will do fine.
If you need to go to cash with the Dis/PXR take-over looming you can expect some AAPL upside on Monday. You could exit then if you wish.
Alt: This would sure be a tough time for me to sell out. I wish you'd concluded this before earnings report, before the drop in stock price. Did you?
I provided advanced warning of the dip on:
12/22/2005 1:18:05 AM
Altaire"Swami"4 Predicts
My crystal ball says that the AAPL runup to MacWorld will break 80.00 dollars a share and possibly approach $90.00 ..... It's getting clearer ....but I expect at least two brokerage houses will downgrade Apple to either a hold or even a sell after the blowout earnings report. Share price should settle post earnings at just north of $75.00 a share. They will site the Intel transition, constrained NAND memory as a factor to slower AAPL growth in 2006 and The Microsoft/MTV music store challenge to iTunes.
I'm Holding through earnings and expect another great year for 2006. I also predict at least another 30% return from AAPL come December 2006.
http://www.investorshub.com/boards/read_msg.asp?message_id=8975676
Just North of $75.00 is about where Apple is now.
on
1/17/2006 1:53:31 PM
I posted that AAPL could dip as much at $10.00 a share with support at 85.00.
Apple closed below $85.00 a share ..... that was a signal to get out.
http://www.investorshub.com/boards/read_msg.asp?message_id=9288720
I'm holding my AAPL positions through earnings.
I'm expecting AAPL could dip as much as $10.00 a share post earnings. if your not prepared for that event ..... now would be a goodtime to get out. In the long run it will just be a blip on the radar screen. If Apple closes above $85.00 today then we should get a pretty soft landing.
-Alt
Wow, If that deal goes through AAPL will have an excellent partner in the Digital downloads biz.
-Alt
IMHO, AAPL is fairly valued
Hey Linda, when economic indicators seem to indicate a weakening economy you need to re-evaluate how much risk your exposed to inorder to determine how to preserve capital if the market continues to drop.
Even a Top Notch company like Apple can be effected by a faltering economy. I'm using this economic cycle to do some market research on equities I should purchase over the next couple of years. In the meantime I'm content in the success I acheived in the markets over the last couple of years.
If the real estate bubble does pop ... god help us .... I'm even getting prepared to buy some land to build my dream home.
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Hey Tomm,
GOOOoooooo AAPPPPLLLLLLLLLLLLL !!!!!!!!
Thanks Tex
-Alt
Linda, I expected AAPL would tank to a certain degree post earnings.
The spectacular iPod revenue saved the companies bacon. I have a much more conservative outook on Apples core computer business because of the Intel transition and the chance of a recession also influenced my outlook. If all goes well in 2006 Apple will be poised for another spectacular growth period in the 1st quarter of 2007.
-Alt
AAPL Crumbs
Everyone can agree that AAPL has had an incredible run over the last Two years.
The current Apple Intel transistion and a US economy teetering towards recession is bound to give us a little Indigestion from too much apple pie. Apple is in an enviable position with its iPod/iTunes Music and Video download business. But we should expect a slower appreciation of value in AAPL shares in 2006. The next Two quarters for AAPL will be challenging ones. Many long time Mac users may be hesitant to purchase the new MacTel boxes until enough Universal Binary applications are available and I cannot fault them for it. Apples G5 Quad processor PowerMacs are winning over many fans in the scientific community its an outstanding piece of hardware with unprecedented performance. The new Intel MacBook line of notebooks are poised to sell well despite a lack of a dual layer DVD burners and no Firewire 800. How well is hard to determine because the transition isn't even close to being complete. Despite the challenges ahead a 25% - 30% stock appreciation in AAPL in 2006 is very likely because of Apples lead in the emerging Digital download market. Its success with its end to end solutions for audio and video has really shaken up the tech and entertainment sector. Its also highly likely that Apple will continue to lead in what has often been referred to as the convergence of computers and entertainment into Internet appliances. The irony is that Steve Jobs had stated that this was unlikely some years ago. With the emergence of WiMax 802.11n (wireless technology) and a proven new revenue stream for entertainment companies its highly likely that this convergence will begin to accelerate in the latter half of 2006. The timing of Apple's suit to settle the Burst (Streaming) technology litigation seems to hint at where Apple is heading in pressing its advantage in the Digital downloads market. I remain moderately bullish and yet guarded on Apple's prospects for 2006. Apple needs to keep outpacing its rivals with new product introductions for it to regain its momentum in the marketplace over the spectacular rise in 2005. Knowing what motivates Steve Jobs i'm willing to bet that by the end of 2006 Apple will continue to amaze and surprise us as investors.
Best Always,
-Alt