SA:Apple's Balancing Act: 3G iPhone vs. Jobs' Health - Barron's
by: SA Editor Jonathan Liss posted on: June 16, 2008 | about stocks: AAPL Font Size: PrintEmail What a week it was for the world's foremost CE gadgets maker. Apple's (AAPL) guru, CEO Steve Jobs, unveiled its second generation iPhone at the company's annual Worldwide Developers Conference in San Francisco and it pretty much met or surpassed all expectations. Consumers can forget about all those complaints about the slowness of i-surfing the web via the 2.5G EDGE network when a faster WiFi network wasn't available; iPhone 2.0 comes locked and loaded for much faster 3G network access.
Another thing that has the Apple faithful riled up this time around is the 2.0's price -- or lack thereof. Despite the fact Apple's latest iPhone has features a-plenty that the pre-3G version lacks, such as built in GPS, a new and aggressive pricing strategy will run consumers just $199 for 8 gigs of storage -- half the price of the model it replaces. Instead of retailing the phone at full price and taking a monthly cut from exclusive carrier AT&T (T), Apple will forgo its cut and AT&T will subsidize the phone's price in exchange for a two-year service contract. The reduced pricing means barring unforeseen disaster, Apple should blow past the 10 million phone sales estimate it set for itself in FY2008.
Despite the bounce in share price the 3G's coming out party should have in all likelihood created, Apple shares spent the week selling off (-7.5%). The reason, according to Barron's' Eric Savitz, is simple: Steve Jobs-related health concerns. Following last week's 'Jobs-note', both the blog-o-sphere and mainstream media were filled with reports of a gaunt-looking Jobs, setting off a round of rumors that Apple's number one executive had experienced a relapse of the rare form of pancreatic cancer he suffered from four years back.
Apple's press team responded to the rumors by saying Jobs merely had a "common bug" but to Savitz, the stock's sharp reaction to what amounted to nothing more than hearsay and speculation (at least for the time being) alluded to a greater truth - Apple investors have serious concerns about the company's future prospects in a post-Jobs universe. According to Savitz, "More than any other company, Apple is viewed as a creation of its CEO; it's a cult of personality." Without Jobs in the Chairman's seat, Apple's share price could suffer a serious setback - 3G iPhone or not.
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TechCrunch's Michael Arrington ponders what will happen to the iPhone's rivals.
Author Eric Savitz discusses Apple's refusal to seriously engage in Jobs-related health speculation.
FP Trading Desk notes analysts are thoroughly impressed with the surprise change in Apple's carrier revenue sharing agreement, which should drive an additional $2 billion in free cash flow to the company in 2009.
