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The first days of the new year have rung a happy note for Apple (Nasdaq: AAPL), offsetting the legal battle with Nokia (NYSE: NOK) that cast a shadow on the dying days of 2009.
Downloads from the iTunes App Store have passed the 3 billion mark, and there's no shortage of excitement about the tablet Apple may be unveiling later this month.
Finally, Apple has bought mobile ad firm Quattro Wireless in a move that could end up being very profitable.
Playing the Ad Game
Apple has purchased mobile ad company Quattro Wireless just weeks after Google (Nasdaq: GOOG) gobbled up a similar player, AdMob. Cupertino had to do something about the mobile ad space, which is expected to grow fast.
"This is clearly a land grab," said Carl Howe, director of anywhere research at the Yankee Group. "Everybody's trying to stake their claim to ads in the mobile world because of the sheer numbers -- it's about aggregating several billion devices."
Unlike Google, however, which relies on income from online advertising, Apple does not need to do anything but sit tight on Quattro. "They could just sit on it and put it on the market later for 10 times as much as they paid for it," Howe pointed out.
On the other hand, Quattro's roster of clients includes major league players such as Procter & Gamble, Ford, NetFlix, Time, Visa (NYSE: V), Disney (NYSE: DIS) and CBS Interactive. If it did decide to move into mobile advertising, it could do well.
There's nothing like a heads-I-win/tails-you-lose situation to keep an investor smiling.
Nibbled by Nokia's Lawyers
In the last weeks of December, Nokia expanded its legal attack on Apple, filing lawsuits with the U.S. International Trade Council and the U.S. District Court for the District of Delaware.
In October, Nokia had filed its first suit against Cupertino, which triggered a counter-suit.
While the legal disputes may take years to resolve, investors shouldn't worry -- they're just steps in a minuet that will lead to cross-licensing and patent agreements, according to Howe.
"These lawsuits are a negotiating tactic to get to cross-licensing and patent agreements more than anything else," Howe told MacNewsWorld. Although Nokia might want to extract royalty payments, Apple will put up a fight, and Nokia's case isn't cut and dried.
"There's a pretty strong argument that could be made saying Nokia's infringing on Apple's multitouch patent as well," Howe pointed out. "Their multitouch products did come out after the iPhone."
Doing the App Store Boogie
By any measure, the pull of Apple's iTunes App Store is impressive. Apple on Tuesday announced that more than 3 billion apps have so far been downloaded from the store by iPhone and iPod touch users worldwide. "We see no signs of the competition catching up any time soon," Apple CEO Steve Jobs said.
The App Store's main function is to help retain Apple customers by providing a fulfilling user experience, Broadpoint Amtech analyst Brian Marshall said. It has grown rapidly since it was launched only 18 months ago, and it's accelerating -- it hit the 2 billion download mark just last September.
That rapid growth means developers creating products for the App Store are more likely to make money there than elsewhere. For example, Tapulous, developer of apps such as the "Tap Tap Revenge" game series, claims to be making close to US$1 million a month from the App Store. "If you're somebody that's interested in making money, there's a lot more paid apps in the App Store than, say the Android Market, so the App Store is a lot better value proposition," the Yankee Group's Howe pointed out.
This will keep app developers putting out new products for the iTunes App Store, helping build customer loyalty. That can only be good for Apple's share prices.
Will the 'iSlate' Be a Bitter Pill?
Another Apple product that has watchers all worked up is the expected Apple tablet, currently being referred to as the "iSlate." Word is, Apple will unveil this device in San Francisco on Jan. 27, and the excitement is rising to a frenzy.
Perhaps there's good reason for this. Apple should sell an estimated 2.2 million units of the tablet in calendar year 2010 at $599 retail each, predicted Broadpoint Amtech's Marshall.
That estimate might be at the low end, Marshall told MacNewsWorld. "If bullish build plan forecasts of 10 million units for calendar year 2010 prove accurate, I'll add $1.50 to my calendar year estimated earnings per share (EPS) of $11.75," he said. "If you apply 20 times that to the incremental EPS, add another $30 to my existing share price target of $260, which means Apple shares will be close to $300."
However, things might not go smoothly for Apple in this area. "There will be a turf war with Kindle and other e-readers," Yankee Group's Howe warned.
Other issues also remain to be resolved. "There are more questions than anything else about this device, and there are even questions about the viability of this category," Jim McGregor, chief technology strategist at In-Stat, told MacNewsWorld. "The tablet's just version two of the mobile Internet device with an ARM-based processor."
A mobile Internet device (MID) is a multimedia-capable handheld computer that provides wireless access and is designed to provide entertainment, information and location-based services for personal use. "Wireless carriers weren't on board with the MIDs because they couldn't make money off them," McGregor said.
