Thunder in Cupertino Makes It Rain on Wall Street
Apple spent the week picking fights, and AAPL holders have never been happier about it. Perhaps the nastiest brawl will be with HTC over alleged touchscreen patent violations. That altercation could easily spill into the tablet arena, which already has the iPad slotted to spar with challengers like HP's Slate. Also, Apple's new partnership with Steam could bloody some noses in the gaming world.
03/10/10 5:00 AM PT
Apple has announced the iPad will hit retail shelves April 3, sending the adrenalin surging through competitors' veins. HP and several Chinese manufacturers have announced tablets in what might be perceived as an attempt to capitalize on the not-quite-a-laptop, not-really-a-netbook category.
Meanwhile, in a move reminiscent of a high-level chess game, Cupertino has filed a patent suit against HTC, maker of the Google Nexus One smartphone. One of the complaints alleges HTC violated Apple's patent on touchscreens, a move that could set back not just Google's competitor to the iPhone but also tablet makers who want to challenge the iPad.
Further, Apple has taken a big step in the realm of gaming, with online game distribution giant Valve's announcement that its Steam service will make its debut on the Mac.
The market loves all these moves -- at Tuesday's market close, Apple stocks stood at US$223.02, up $3.94 or 1.8 percent from the previous day's close of $219.08, which was itself a record high.
The iPad Cometh
Apple last week announced that the first version of the iPad will be available in the United States on April 3.
Customers can begin pre-ordering WiFi models on March 12 and models with both WiFi and 3G in late April (the 3G version of the device will be available at a later date).
Let's not bother with nitty-gritty details like the price of the iPad; what's important to investors is the impact the iPad's release will have on Apple's share prices.
As Tuesday's results showed, the market loves the iPad. So do analysts.
Apple will ship about 2.8 million iPads in fiscal 2010 and 7.3 million in fiscal 2011, Barclays Capital's Ben Reitzes reiterated in a note to investors. Meanwhile, Broadpoint Amtech's Brian Marshall was even more optimistic. Apple will ship 4 million to 7 million iPads this year alone, he predicted. Apple stock, he added, is a buy, despite its record highs.
Investors can only chortle in joy.
We Have Seen the Enemy
Competitors to the iPad are streaming into the market.
On Monday, HP chief technology officer Phil McKinney blogged about HP's Slate device, which was first demonstrated at the Consumer Electronics Show in January.
Also, several Chinese manufacturers are apparently rushing to bring out their own tablet devices.
Meanwhile, Sony is developing a new lineup of handheld devices, including a smartphone that will let users download and play PlayStation games, according to a Wall Street Journal report. These will apparently be launched later in the year.
However, Sony's seeking to engage Apple on all fronts -- it is also working on an iPad alternative that will function as a netbook; an e-reader and a new PlayStation Portable. Later this month, the Japanese electronics giant will launch its online media platform, now known as "Sony Online Service," to battle Apple's iTunes.
Could the competition threaten the iPad?
Two Ships That Pass in the Night
Perhaps not. The iPad and PC tablet devices appear to be targeting different markets.
"We see the iPad as a consumer play, as distinct from being a productivity play which could be an enterprise play for PC manufacturers," Susan Kevorkian, a program director at IDC, told MacNewsWorld.
Most of the apps for tablet PCs will come from the PC world, Allen Nogee, a principal analyst at In-Stat, pointed out. "The challenge for tablet makers using Windows 7 is that users might look at them as crippled PCs and not a new type of device, which is the feeling that Apple is shooting for," he told MacNewsWorld.
In fact, it's not Apple that needs to keep a close eye on the competition; it's the tablet makers who need to be keeping a close eye on the iPad, Kevorkian said.
"Any device manufacturer that's going to offer a tablet form factor device this year absolutely needs to keep iPad in its sights because their devices will be compared to the iPad," she explained.
The Art of War
Perhaps Apple only needs to close off new markets for tablet PCs instead. That's what it seems to have been thinking when it filed a patent lawsuit against HTC.
The complaints in the lawsuit include one claiming that HTC has violated Apple's patent on touchscreens, and that item could make many tablet makers pause for thought.
"Can HP and others make a compelling tablet device without using Apple's patents?" In-Stat's Nogee asked. "Apple has fine-tuned how it competes with imitators."
HP, at least, is thinking hard about this issue. McKinney's blog devotes considerable time to tracing the origin of the touchscreen.
Meanwhile, Google has announced moral support, at least, for HTC. Even so, it won't be drawn into whether or not it will jump into the lawsuit as a codefendant.
"We are not a party to this lawsuit," Google spokesperson Carolyn Penner told MacNewsWorld. "However, we stand behind our Android operating system and the partners who have helped us to develop it."
The fuss all boils down to money -- Gartner predicts that the worldwide market for touchscreen mobile devices will jump 96.8 percent in 2010. By the end of this year, nearly 363 million of these devices will be sold compared to just over 184 million in 2009.
That's as good a stimulus as any to spark a turf war.
But will there be a turf war at all? If there is, HTC and Google will take point, and as any combat veteran can tell you, that's the most dangerous position in a shootout.
One can't help wondering, will Google cut its losses and run if the court case looks as though it's going to be resolved in Apple's favor? It's easy to fly the flag as long as you don't have to plunk down some dough.
If Google does hit the highway, what will happen to Android phones with touchscreens? Will the iPhone be the sole survivor standing after the legal dust settles?
If so, that's sure to give Apple investors a boost. Competition's a mighty fine thing, as long as it happens to someone else.
Steaming Into Play
One more piece of good news for Apple investors is the coming of Valve to Mac machines.
Valve is one of the largest distributors of online games. It will make its Steam online gaming service and Source proprietary gaming engine available on the Mac. Steam is a sort of iTunes for games -- create an account with your credit card, then buy game downloads a la carte from its extensive library. It carries big-budget new releases as well as casual games and some golden oldies, but until now, it was only available to PC gamers.
With online game players being fiercely addicted to their -- uh, can we call it sport? -- that could open up yet another lucrative avenue of earnings for Apple.
Let the games begin.