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September 13, 2006

Impressions of Apple's Product Announcements

Overall, the Apple Computer (AAPL) announcements were in line with my expectations. I almost got right the new wireless device that will get the video you download to iTunes over to your TV: It's not a MacMini; it's just half the size. This product, due in the first quarter of 2007, is probably the most important announcement on a long-term basis. But I wouldn't overlook those new iPods and the upgrade to iTunes. (I've already installed it in a Windows PC, and it has some nice enhancements in navigation and offers free album art for all the CDs you've ripped into iTunes previously.)

The iPods are basically double the capacity in slimmer, smaller and similar forms, with improved screens, all at the same or lower price points. There was not an introduction of a true video iPod, which I guess means even better resolution on a larger screen, with a movie-like aspect ratio.

The reason the iPod refresh is important is because one of the few blemishes in the near-term story for Apple is the incredibly difficult December quarter comparison against last year's 14 million unit quarter. I've long feared the screams of joy from bears when iPod sales this holiday season didn't grow or even fell short vs. 2005.

The refresh seems to offer a good reason to upgrade for current users, which, along with latent demand from those still looking for their first MP3 player, ought to give a nice push to unit sales. Even better, the refresh should set the stage for solid year-over-year growth as 2007 unfolds.....

The bottom line from today's announcements is that the big picture remains the same: AAPL has opportunities to add billions and billions of good margin revenue as it grows iPod and Mac sales, possibly introduces a cell phone and enters the living/family room. As I've said often, there aren't many mega-cap stocks that offer real prospects for 15%-20% annual growth. Apple does, and on that basis, the shares deserve a premium valuation and should head to new highs over the next three to six months.

Posted by Steve Birenberg at September 13, 2006 12:50 PM in AAPL