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Research firm hints at possible Apple innovations

post #1 of 18
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In a research note released to clients on Tuesday, UBS Investment Research offered a preview of Apple's second quarter earnings while analyzing some potential innovations it expects from the company over the next two years.

For the recently ended fiscal quarter, UBS estimates that Apple will earn 23 cents per share on revenue growth of 67% year-over-year to $3.2B. However, the firm notes that these estimates are conservative, suggesting Apple will likely post slightly higher figures when it reports its 2Q05 earnings on April 13th.

"Our checks indicate that perhaps the biggest issue during fiscal 2Q05 and into this month is sales of new PowerBooks are being adversely impacted by problematic trackpads," the firm said. "Apple is remedying this issue with longer lead times, a "quick fix" on its website and increased service calls. However, we believe that upside in other segments more than make up for the PowerBook issues."

Analysts Ben Reitzes and Jeff Brickman said new products from Apple could bring more photo and video management features, which could expand iTunes software and the iPod form factor beyond origins in music. "As evidenced by the iPod Photo, we believe iTunes can be expanded not only to manage digital photo libraries, but also video or movie downloads with even a video service emulating the iTunes Music Store," the analysts said. "As a result, we believe an expanded and free iTunes download represents a "Trojan Horse" into Windows-based PCs, expanding Apples appeal further and creating more switchers over time."

According to a series of recently performed checks, UBS said Apple's future product developments and innovations could possibly include: more innovation around photo-capable iPods; multimedia iPods; a digital media hub; and even an iTunes-like movie/video download service.

In the research note, the analysts detailed their expectations for each of these possible innovations in an attempt to address public speculation about what directions Apple may be headed.

iPod photo Features Could Become Standard

The analysts believe that iPod photo-like features will eventually become standard in hard disk-based iPods as color screen prices fall and battery technologies improve.

"Apple continues to build-out its imaging ecosystem in a similar fashion as with what the company was able to accomplish with music," the analysts said. For example, they cite Apple's recently introduced $29 camera connector, which offers a cheaper alternative to purchasing additional memory in order to save pictures when on the go. The analysts said digital camera owners may begin to see the iPod photo as a compelling accessory that can expand the capacity of their camera, in addition to aiding in the creation of portable digital photo albums.

UBS predicts Apple will update or expand its iPod photo product line prior to the holiday shopping season, lowering price points and possibly introducing a photo-capable flash-based model.

Multimedia iPod Could Still Be Possible

Despite comments from Steve Jobs to the contrary, the firm said it wouldnt be surprised if Apple eventually launched some form of a multimedia iPod. "Reports suggest that Apple is likely watching the reception for the video features in Sonys PSP very carefully," the analysts wrote in the report. "We believe that real success for a video/movie capable iPod may need to come in conjunction with a new download service from Apple, that can easily put content into the device." They said such an Apple device would likely not surface until 2006, and if it did, it would need to retail for less than $500 and include a color screen akin to the PSPs, at least 4-6 hours of battery life, and 60GB of storage.

Expect a Media Hub a Gateway into the Digital Home

UBS also believes it's increasingly likely Apple will focus on becoming the center of the "digital home," saying by the end of 2005 the company could introduce a media hub that acts as a server and storage unit for music, movies, photos and other types of home entertainment.

"We believe Apple may be able to build upon its experience with iTunes to create a comparable service for motion content," the analysts wrote. "With Steve Jobs connections in entertainment, we doubt he will sit back and let this opportunity slip into the hands of a competitor."

While UBS in its recent report was unable to offer specifications of such a product, the firm did say that its checks indicate Apple is currently looking into development of a digital hub product that could hit the market by the end of the year.

iTunes For Movies?

Saying it believes the movie industry is in a similar position to the music industry of five years ago, UBS thinks there is "significant opportunity" for Apple to become the "thought leader" again with an iTunes for movies download service that could debut by the end of 2006.

"We believe that the iTunes model could work well with movies as download times improve," the analysts said. "Also, Steve Jobs may be one of the few industry executives that may be able to pull off an agreement that would be palatable to both the movie and consumer electronics industry."

Cell Phone or Wireless iPods

Touching on the recent controversy surrounding the Apple-Motorola iTunes phone (or lack thereof), UBS said it believes the cell phone market represents an exciting opportunity for Apple in terms of driving additional songs through iTunes; adding that any imposed licensing fees for iTunes would be lucrative for Apple. However, the firm believes the company must continue to innovate with iPod capabilities in order to fend against an eventual boom of hard-drive equipped cell phones that will be capable of playing music files and possibly making the iPod seem obsolete.

"We believe that it is more likely Apple is trying to figure out how to make a wireless iPod (perhaps using WiFi) to download music on the fly," the firm said. "This type of wireless iPod device is likely still on the drafting table, but could become a reality by the end of next year in our view."

While offering no guarantees, UBS said Apple is in a strong position to capitalize on current trends. "The dynamics in consumer entertainment seem to still be moving toward Apple and the company has an opportunity to expand its competitive advantage with its software," the firm said.

UBS believes Apple's software must play a key roll in moving forward, and estimates that each point of PC market share gained by the company will equate to about $2 billion in incremental Macintosh revenue. "The bottom line impact from each point of share would top $0.30 per share using incremental margin analysis," the firm said.

UBS maintained its "Buy" rating on Apple with a price objective of $50 a share.
post #2 of 18
iFliks-movie downloads? Sirius Satellite/Ipod Radio? 2006 PLEASE!!!
post #3 of 18
I'm not sure that it takes a great leap of imagination to see Apple finding ways to continue leveraging their skills with hardware technology, software technology...media technology in particular, and of late...building services and partnerships to support same (iTMS)...in other areas.

Does this mean vPod? Possibly...or some variation of the idea. Apple seems to be getting smarted about running their business, and being aggressive about it too...yet still being patient. For example, with video, they may well ahve ideas, plans, products, etc....but the timing and some missings pieces might not yet be right. They will be patient.

Apple has way too much going on with video technology in particular to sit that game out. What form it takes is a big guess right now. But I doubt seriously they will be sitting it out.
post #4 of 18
I guess you can stick the word "possible" on just about anything

"we believe iTunes can be expanded not only to manage digital photo libraries"

I HOPE not... iPhoto does a fine job. Those two tools do NOT need to merge, other than the automated task of iPod synching, which Apple has already taken care of.

As for the movie industry being like the music industry... I can NOT take thank kind of comment seriously. There are HUGE and obvious differences in the way people CONSUME music vs. movies. The way they choose them, where and how often they play them, and how much they replay the same content again and again. Those differences will remain.

Movie downloads could work, but NOT because people treat them the same as music. As for portable movie players... that's neat and all, but has little value for most people. We ALREADY have portable movies, so making the player portable too just lets you watch in new places--places most people don't care to watch movies. Photos on iPods is a subsegment--but video on iPods would be micro-niche!

And yet still cool for tech heads like me
post #5 of 18
I don't care how they do it, as long as it is WITHOUT a monthly fee. I plan on living for another 50 years atleast. That is 600 months, just to keep a hand full of movies that I like on my computer better not cost me 10 bucks/month!
post #6 of 18
Nagromme

good and succinct points on the viablility of portable video. I can only imagine the horror that a Director of Photography experiences when they see their handywork scrunched down on a miniscule LCD and overly compressed.

I think we all know that Apple is planning to expand the iPod/iTMS reach. It's only a matter of "when" and "what price"
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post #7 of 18
I don't really buy into the portable video (e.g., vPod) thing either...but something with video seems likely.

Maybe it is Mac mini cum TiVO done even better kind of thing.
post #8 of 18
Quote:
Originally posted by nagromme
I HOPE not... iPhoto does a fine job. Those two tools do NOT need to merge, other than the automated task of iPod synching, which Apple has already taken care of.

Agreed. But Apple needs to decouple iPod from iTunes altogether. That feature belongs to iSync (on Panther) or Sync Services (on Tiger).

Movie is a bit different though. I am already a bit annoyed by iPhoto managing movies from camera but at the same time, iMovie isn't really designed for managing movies either. I suppose iMovie could be made to manage movies. In any case, I certainly hope we don't have to use iTunes to sync music, photos, and movies to iPod.
post #9 of 18
There is an article on Cnet about Sony's desire and the other Hollywood studios too to have a ITMS like video download application and/or site. What I found most interesting was the following quote.

"Sony's plans--and similar moves by other studios--are likely to avoid empowering any one technology company--such as Apple in the music equation--and allow studios to pocket more of the profits. The philosophy in Hollywood is "Define your own agenda or someone else will for you."

If this is true and Hollywood would like to cut out Apple and I would think Microsoft they (Apple) should get into this area as soon as possible.


Hollywood seeks ITMS for movies
post #10 of 18
Quote:
If this is true and Hollywood would like to cut out Apple and I would think Microsoft they (Apple) should get into this area as soon as possible.

Why? Broadband penetration needs to be better. There is no format for exchanging movies that contain todays basic DVD features. Let Sony waste a billion dollars on a fruitless effort. There is no evidence that suggests that consumers are unhappy with todays DVDs. This hype stems from the success of the iTunes store and the assumption that people want to download movies and store them like they do music. That is fallacious. As Nagromme stated people generally consume music in different ways and in different places than they expect to consume movies.
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post #11 of 18
i was talking a with a friend not too long ago, and with hitachi (or whoever makes the ipod mini drives) stating they'll be at 20 GB by 2006, there will be a point, very soon, where storage capacity will not be an issue. we are already there for basic files, music, consumer-level images, but not quite there for high-def video. but soon...

plus compression technologies are always getting better, and no one can fill up a personal 500 GB drive with just documents (hell, a terabyte will be within consumer reach, waht, in a year???), so the horizon for digital media is looking rosey indeed. whereas microsoft still holds to its cash cow of office, but how long will people keep buying upgrades for what is, in essence, a word processor/spreadsheet/email/presentation application?
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post #12 of 18
Quote:
Originally posted by imacFP
"Sony's plans--and similar moves by other studios--are likely to avoid empowering any one technology company--such as Apple in the music equation--and allow studios to pocket more of the profits. The philosophy in Hollywood is "Define your own agenda or someone else will for you."

I don't think it has anything to do with profits, Apple doesn't charge all that much. It probably has more to do with Apple controlling the front page content and deciding which artists are promoted the most.

No one is making money off of online music stores, it's going to be even more expensive running an online movie store - the bandwidth required is going to be insane.
post #13 of 18
Quote:
Originally posted by the cool gut
I don't think it has anything to do with profits, Apple doesn't charge all that much. It probably has more to do with Apple controlling the front page content and deciding which artists are promoted the most.

No one is making money off of online music stores, it's going to be even more expensive running an online movie store - the bandwidth required is going to be insane.

unless the bandwidth is already being used in some other fashion. here, my brain is thinking of some sort of cool intersection between apple, netflix, and the recent tivo/comcast agreement. want a copy of that on-demand movie you just watched from your comcast/tivo box? just process the transaction via the iTunes/Movie store (because it's already been downloaded to your box while you watched it), and then burn it to your own dual-layer dvd burner in your box to keep. that way, apple isn't even TOUCHING the bandwidth, just the transaction. apple had to take over the bandwidth for the music industry because no one else had a pipeline established. with video, there already IS.

of course, that's a lot of chickens to herd, but if anyone can do it, it's steve.

(above slightly edited to clarify my thoughts)
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post #14 of 18
Quote:
Originally posted by the cool gut
No one is making money off of online music stores, it's going to be even more expensive running an online movie store - the bandwidth required is going to be insane.

I bet the music labels are.
post #15 of 18
There is all this talk of "what if a video iPod??". Correct? Apple has this great section in iTunes for viewing music videos but it's bound to your computer. Wouldn't it be great if you could take your favorite music videos on the go with you and then same way you can with an iPod Photo with it's photos...drop the thing into a dock connected to a TV via S-Video and watch your favorite music videos on the go?

Steve has already said at the special event back in October with U2 that people are putting all this development into portable video devices and that Apple felt video was "digging in the wrong place." but he then asked "what can we add to the music?" Well, you have the music obviously, now with iPod Photo you have album art and your pictures, I think they should add music videos to the experience! Work it out with the labels to make the music videos posted on the iTunes Music Store downloadable to the iPod Photos and give the iPod Photo a higher resolution screen.

It's something I've been noodling on for the past months now and that's the only way a video iPod would make sense. Steve has already admitted, and as he is CEO of Pixar I believe it, when he says there's no content for video players. Even if he was lying; any downloadable movie would take up quite an amount of space to get it into any kind of player (not to mention the hard drive that player would have to have) with any decency of quality. BUT a music video is short, 3-4 minutes tops, and if compressed right you can get a video of that length compressed to about 20-30 MB in size and still have decent quality and if you really want to eliminate the quality aspect plop H.264 in there! Highquality video "scalable from HD all the way down to 3G cell phones!"

So I think iPod & Music Videos should be the next route Apple takes if they're not already thinking about going that route!






8) 8)
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post #16 of 18
Quote:
Originally posted by BriJQ84
So I think iPod & Music Videos should be the next route Apple takes if they're not already thinking about going that route!

It may be on its way, see

http://www.siliconvalleywatcher.com/...convalleyw.php

Knowing Apple's desire/obsession for secrecy, I expect the wrath of Steve Jobs will be heading toward some individual/company. I hope they are well prepared.

I have seen very impressive demos of what this chip can do, and it does it using very low power consumption.

Although could be destined for a video iPod, it could be just an update/cost-cutting exercise for the iSight camera.
post #17 of 18
Apple should make an iPez candy dispenser the size of a Shuffle so you can listen to music and have a treat when you want.

Hey. They made frikken iSocks, they can damn sure as well make an iPez Shuffle
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post #18 of 18
Quote:
Originally posted by zanc
It may be on its way, see

http://www.siliconvalleywatcher.com/...convalleyw.php

Knowing Apple's desire/obsession for secrecy, I expect the wrath of Steve Jobs will be heading toward some individual/company. I hope they are well prepared.

I have seen very impressive demos of what this chip can do, and it does it using very low power consumption.

Although could be destined for a video iPod, it could be just an update/cost-cutting exercise for the iSight camera.


That's definately one way of looking at but I still think iPod + Music videos would be pretty sweet and the most practical way to go if you're going to put anything kind of video into an iPod. The iSight thing would kick a lot of ass too though.
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