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Apple Is Saving the Best for Last

By Chris Maxcer MacNewsWorld ECT News Network
Oct 23, 2009 4:00 AM PT

Usually by the end of October, early November at the latest, Apple tends to wrap up its retail product innovation and set its lineup in stone for the upcoming holiday buying season. Not this year. Rest assured, something new and important is coming from Apple in time for holiday sales.

Apple Is Saving the Best for Last

Here's why: According to comments made during Apple's latest financial results call with analysts this week, the company is forecasting a significant rise in air freight costs to hit in the December time frame. More importantly, this increase is big enough that Senior Vice President and Chief Financial Officer Peter Oppenheimer and Chief Operating Officer Tim Cook felt they needed to mention it to investors (you know, financial reporting guidance rules and all that), then clarify the costs while remaining characteristically tight-lipped about the details.

In response to an analyst question about December's projected performance, Oppenheimer cited "significantly more air freight" as a charge that would affect the forecast's margins.

Upon further questioning later in the call, Cook explained, "The air freight is not related to the iPhone, so these are unrelated topics," noting that the air freight is planned to get enough units into the channel in time for the holidays.

Oppenheimer chimed in, "I'm sorry I can't be specific on the product, but it's an abnormal sequential increase."

Right. The "product." Singular.

Here's the deal: If this freight charge was associated with multiple products -- just tipping Santa some extra cash to fly more Apple-logo goodies of various sorts around the globe -- Oppenheimer and Cook would have simply played off the extra charge as an extra charge to meet extra demand, or reflect rising shipping costs by weight.

Looking for more detail, analyst Bill Fearnley pushed the issue near the end of call. Cook said, "What is driving the air freight is, we haven't been able to figure out a way to move the holiday season. We have to get all of these units into the channel for holiday sales. I'm sorry I can't be more specific than that. You have to have a little bit of fun on these calls."

Three things here: 1) Cook already said these units are not iPhones. 2) Oppenheimer said it's a product. 3) Cook said you have have to have a little bit of fun on these calls, which means the veiled air freight references are intentional. Apple's execs don't go into these calls planning to just wing it -- they know exactly what they're going to say, they anticipate analyst questions, and they rarely make mistakes.

So What's Coming?

There's been some online chatter speculating that the most likely product would be an iPod touch with a camera. After all, isn't it silly that the iPod nano gets video recording but the touch gets left out? The iPod touch is important for holiday sales. It's great for kids and adults, plus it'll offer thousands of cheap games for kids. Could Apple be planning an upgrade so soon after the September announcements?

No way. First, it's highly atypical. I can't remember the last time Apple made a quick, yet major revision to its product line on the heels of a rollout. Heck, all the company had to do was drop the price of the original iPhone back in 2007 to anger its customers and make them feel cheated. Even though Apple is in the volatile and rapidly moving electronics space, I'm sure the company learned its lesson: Innovate too quickly and you'll disappoint your best customers. It's a fine balance, of course, but Apple understands it.

Besides, Apple can easily ride this holiday season on its existing iPod lineup, making sales and making a profit. There's no need to introduce a touch with a camera. Oppenheimer implied that Apple's iPod plan is nailed down. He said, "With the new (US)$199 entry price point for the iPod touch and the updated features of the iPod shuffle, nano and classic, we believe the iPod's lineup is attractively positioned for the holiday season."

Why mess with that?

So How About an Apple TV?

Sorry, it's not an Apple TV. Here's why I don't think so: First, while I believe the Apple TV is successful and profitable for Apple, it doesn't represent big, fast growth because it's hard to a) lust after an Apple TV, and b) justify the expense without more-than-average consumer knowledge. Basically, most consumers have to understand that the Apple TV is more than just a way to rent movies and buy TV shows online to really be willing to pay for it.

But what if it's a real, all-in-one Apple TV? Hmm. Not there yet. If Apple can deliver a 27-inch iMac for $1,700 ... Apple still is just not anywhere near competing on price with regular television sets. HDTVs have to get up into the 42-inch range at a much lower price point. With the living room, size matters.

What if Apple has acquired a 32-inch screen and stuck an updated Apple TV on the inside? Maybe. But would Apple really try to get that to market right now? Would it be worth a big shipping cost? Come on. Even a 42-incher at a nice price point couldn't move that many units. Most living room enthusiasts have already invested in a decent HDTV -- no way am I going to ditch that just for a really pretty and functional new one from Apple.

Overall, I just don't think Apple would waste time and attention on it. Where's the rapid and amazing growth? Where's the opportunity to kick ass and take names? I believe that owning the living room is on Steve Jobs' agenda, but it's nowhere near the top right now. Follow the money, follow the influence, and follow the power.

It all points to mobile.

There's room for a netbook, but a netbook is a reach for Apple. All it would do is compete with its MacBook line, which already enjoys success. If Apple really wanted to offer a cheaper computer to capture the low-end netbook market, I'm inclined to think it would just lower the price of its newly redesigned MacBooks.

Tablet Time?

It's the mythical, famed and rumored new tablet device. Here's why:

Apple may be worried that it's in danger of being too late to market. The Amazon Kindle is doing really well. Barnes & Noble has launched a damn fine competitor, its Nook e-book reader. And the game isn't over for Sony yet, either. After a consumer makes an investment in a decent product -- like an HDTV -- it's hard to get them to switch while the present product is doing an acceptable job.

The time is right for Apple. The company has had plenty of time to iron out kinks in multitouch, to develop new energy-efficient mobile processors and batteries, and if Apple lets a tablet slide until 2010, it will have missed the all-important holiday shopping season.

Still, there's a middle, placeholder sort of solution open for Apple: a bigger iPod touch. First, Apple could fit a camera into it. Second, a bigger screen would justify the idea of a higher price point. Third, if it's quite a bit bigger, and quite a bit more expensive, it'll stave off the consumer issues for those who purchased a relatively new iPod touch following Apple's rollout in September.

Win, win, win.

Apple doesn't even need to have the biggest e-book reader screen to make a lot of potential Amazon and Barnes & Noble consumers pause. Couple this with Apple's likely investments in education and textbooks, and even a mid-size tablet (a.k.a. iPod touch on steroids) is worth getting to market to capture mindshare.

In my mind, the only question left is whether Apple will position it as a big, new model of iPod or give it an entirely new name.

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