New York (NY ) – Many of those who attended Apple's "Let's Rock" media extravaganza yesterday are still scratching their heads, including us here at TG Daily. What was unveiled wasn’t a big deal and could have been covered with a few simple press releases instead. Wall Street agreed with the impression of somewhat underwhelming new products, sending Apple’s stock down 4.7% during the event and about 4% for the day. However, Apple analysts saw good news as well – lower iPod prices.

Realistically, the declining Apple share price during a company keynote is something we have grown used to. Much like there is a lot of risk priced into today’s oil price, Apple shares seem to gain value just before big announcements, just in case the company will release a surprising new blockbuster product.  

Yesterday’s decline was somewhat mild and almost symbolic, and showed that investors at least honored the reduced price points of key iPod products, which may drive holiday sales. The sentiment is shared by analysts who seem to be content with Apple, but are far from being  wowed. Here is a brief overview what key analysts had to say.

Piper Jaffray's analyst Gene Munster labeled Apple’s event as "overall negative" since there were no new products. He also expected more aggressive price cuts, especially with the iPod touch.

David Card from Jupiter Research said Apple "didn't fundamentally reset the product line," noting that the company "isn't going to lose any market share" because the company chose to play it safe. However, he warned Apple is "not going to bring in many new customers with yesterday's announcements."

Mark Mulligan, also from Jupiter, believes that Apple did just what was necessary. "Apple's 'Let's Rock' event proved to be one of iPod evolution rather than iTunes revolution," he wrote on his blog. Mulligan expects Genius to become a big feature over time. "Though many have been dismissive of the Genius feature, I have a sneaking feeling that this unassuming little feature might actually have a big future ahead of it, both at the centre of some deeper offering, but also many people may soon find themselves very attached to the little application."

Andrew Silverberg, vice president and portfolio manager of the Alger Large Cap Growth Fund that held almost 70,000 Apple shares as of July, told Bloomberg he wasn't impressed. "There was nothing revolutionary," he said. "The news is what people were expecting. We have seen these kinds of sell-offs before after other Apple events."

Michael Gartenberg, another Jupiter analyst, thinks Apple is milking the iPod. "I think Apple has positioned itself well for the fourth quarter and the holiday season," he said.

UBS analyst Maynard Um praised Apple's focus on price cuts as a key factor in preserving market share. "We expect the lower pricing to drive demand elasticity," he said. "While the cost reductions could raise concerns about gross margins, we believe it will stimulate demand and benefit profits."

Most analysts doubt that cheaper iPods will negatively impact Apple's margins. In fact, American Technology Research analyst Shawn Wu says that the favorable deals Apple gets from NAND flash memory makers allows the company to swallow price cuts without any impact on margin. He even thinks Apple's margin might actually increase, because the company didn't slash the iPod shuffle. Wu previously braced clients for an underwhelming Apple event.

Apple's CFO Peter Oppenheimer hinted in a conference call with investors that the company's margin will drop by 4% between the current and the following quarter, citing a mysterious "product transition." According to the executive, Apple decided to sacrifice some of its margin because of new products with features and price points that "competitors can't match."

According to data NPD released for July, the iPod dominated the portable music player market in the U.S. with a 73.4% market share, followed by Sandisk's Sansa (8.6%) and Microsoft's Zune (2.6%). Other smaller or no-name vendors accounted for the remaining 15.4%. Apple's own July data shows more than 184 million cumulative iPod sales since 2001.

The iPod sales accounted for 22% of the company's last quarter sales, down from 42% in 2007, thanks to surging Mac and iPhone sales as well as a diversification with new products such as the iPhone.

Apple share price

Sep 10, 2008 21:56     

Yesterday's loss wasn't bigger because the price was already low on fears that Apple won't have anything more then simple updates.Prices went up in early august on speculation about new (cool) products but in the last 2 weeks they declined from 173-174$/share to 151$/share so most were already expecting nothing spectacular.
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