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A Sour Week for AAPL

By Richard Adhikari MacNewsWorld ECT News Network
Feb 23, 2011 5:00 AM PT

Things haven't been looking wonderful for AAPL over the past week.

A Sour Week for AAPL

First, there was the news that CEO Steve Jobs was seen going into a cancer clinic Feb. 17. The news came from the U.S. tabloid The Enquirer. It's well-known that Jobs is ill, but the story and the accompanying photos depicting an especially thin Jobs sent the company's share prices plunging more than US$5, although they soon recovered some of that lost ground.

Jobs was subsequently reported to have only six weeks to live, further spooking investors.

Then along came new challenges to the iTunes Music store from Sony and Google.

Apple also took some heat over its announcement last week that all in-app subscriptions would have to go through the iTunes App Store.

Further, Google announced at the Mobile World Congress last week that the next version of Android for smartphones would incorporate features from Honeycomb.

There was some good news -- Apple reportedly secured 60 percent of the global capacity for touchscreen panels.

However, the last several days have been especially rough on Apple shares, knocking them from the $364.80 peak they hit just a week ago down to a Tuesday closing of $338.61 -- a 3.4 percent loss for the day and a few cents under their price on Jan. 31.

Apple did not respond to a request for comment by press time.

The State of Jobs

Perhaps investors are reading a little too much into Jobs' visit to the cancer clinic. That would currently be normal behavior for Jobs.

Further, Jobs was well enough to attend a dinner Feb. 16 for President Obama together with other top Silicon Valley executives.

In other words, Jobs' health is as good as can be expected.

Brutalizing AAPL With Music

Apple's iTunes store has been a money-spinner for the company. It generated revenues of more than $1.1 billion in the past quarter, Apple announced in its Q1 2011 earnings call held Jan. 18.

That made the store a juicy target, and Sony has struck, launching its Qriocity streaming music service in the United States. This will only work on Sony products at present, and that might hobble the Japanese vendor's challenge to Apple.

Google might be getting into the act -- Motorola Mobility Chief Sanjay Jha reportedly indicated that Google Mobile services will include a music service which will be included in the Motorola Xoom tablet.

The Xoom might pose a serious threat here, as people "seem to like" the device, Will Stofega, a program director at IDC, told MacNewsWorld.

Meanwhile, news emerged Tuesday that Apple's holding talks with the music industry to improve the quality of song files on its store. Better-sounding recordings might be offered at a premium price to purchasers.

In-App Subs evoke Hisses, Boos and Google's Challenge

Apple ignited a fresh controversy when it announced a new subscription service Feb 15 for publishers of content-based apps on the App Store. This requires in-app subscriptions purchased through those apps to use the App Store's billing process. Apple will get its usual 30 percent cut from these sales.

Publishers expressed outrage, and Google announced a competing service, Google One Pass, soon thereafter.

Apple's new subscriptions policy is apparently also causing it grief with the Feds. The United States Justice Department and the Federal Trade Commission are reportedly looking into whether the policy violates antitrust laws.

Whether or not Apple will back down from this policy remains to be seen.

Google DeFrags Android

Hundreds of Android smartphones and tablets were on display at the Mobile World Congress, held in Barcelona, Spain, last week.

Further underlining Android's challenge to iOS, Google Chief Executive Eric Schmidt that the company's working to resolve the fragmentation of Android.

Features from Honeycomb, the version of Android created specifically for tablets, will be included in future versions of the smartphone version of the OS, Schmidt said.

Schmidt also pointed out that Google has an anti-fragmentation clause in its terms and agreements for developers and enforces this by ensuring conformity to the apps.

"This announcement will make it even easier for developers to create applications for Android," Kevin Mahaffey, chief technology officer at Lookout Mobile Security, told MacNewsWorld.

Lookout has found that the Android Market is growing nearly three times faster than the Apple App Store -- 127 percent compared to 44 percent. Further, paid apps now make up 34 percent of Android apps as compared to 22 percent previously.

Lookout predicts that, if apps continue to be developed for each platform at the same rate, the Android App Store would have more apps than the iTunes App Store by mid-2012.

Some Light at the End of the Tunnel

However, there have also been some bright spots for Apple this past week.

For one thing, the impact of the new subscriptions policy may not be as bad as it appears.

"Publishers have to go where the market share for tablet devices is, and right now, that's clearly Apple," Mark Beccue, a senior analyst at ABI Research, told MacNewsWorld. "Consumers aren't going to dump their iPads just because their favorite magazines aren't on them."

Also, Cupertino has reportedly secured 60 percent of worldwide touchscreen panel capacity, according to Digitimes.

Apple has increased production targets for both the GSM and CDMA versions of the iPhone for the first quarter, Craig Berger, a senior vice president at FBR Capital Markets, wrote in a note to investors Tuesday. Further, Apple has increased its target for iPad production from 38 million units to 45 million for calendar year 2011, Berger said.

So why the slide in Apple prices then?

"Obviously the market is selling off on fears about unrest in the Middle East as well as some profit-taking," Berger told MacNewsWorld.

"Apple is cheap and performing well," Brian Marshall, an analyst at Gleacher, told MacNewsWorld. "We reiterate our buy recommendation and have the share price target at $400."


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