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January 17, 2006

Will Apple Provide Your Cellular Service Soon?

Blogs, press reports, and analysts are all noting that AAPL has received trademarks and patents on a series of products and services under "Mobile Me" branding. According to Pacific Crest Securities:

A series of trademarks and patents filed recently indicate that Apple is preparing a connected ecosystem consisting of a mobile product and/or service. These filings consist of an antenna apparatus within a laptop, a method of data transmission using a portable device, and a trademark/service mark for the phrase….Applications and services highlighted in the Mobile Me trademark filing include telecommunication services, and retrieval of data, images, audio and video through global communication networks, including the Internet, TV, cellular and satellite networks.

Who knows where this is going or if it will amount to anything? However, Pacific Crest speculates that APPL is thinking about a MVNO service (mobile virtual network operator). This might be similar to what ESPN is launching. Any mobile wireless service rises or falls based on establishing a subscriber base. One thing I like about this concept for AAPL is that the installed base of Mac users has shown incredible loyalty to AAPL and it is fair to assume that a large number would switch to AAPL for mobile wireless service for their phones and laptops. If iPods were enabled to use the service, either directly or through laptops and cellphones (maybe an iTunes enabled phone from AAPL), the potential user base grows dramatically given that over 30 million iPods have been sold in the U.S. alone. Pacific Crest notes that 4 million subs at $55 per month is a $2.6 billion revenue opportunity. Add in device sales stimulated by a mobile wireless service and you could get another couple billion in sales of phones, laptops, and iPods. As Doug Kass likes to say, "makes you go hmmm."

To reiterate my current stance on AAPL, I am raising my target for the next trimming of my position to the mid-$90s based on the increased estimates, the momentum of iPod sales, and the coming surge in Mac sales due to the transition to Intel (INTC) chips. I also believe further new product introductions throughout 2006, including for more iPods, additional Intel-powered Macs, and possibly digital media and mobile services and products, will sustain the multiple and keep growth investors excited.

Posted by Steve Birenberg at January 17, 2006 01:27 PM in AAPL