[29 August 2007]
San Jose Mercury News (MCT)
SAN JOSE, Calif.—Apple stoked the remarkable buzz machine that surrounds the company with an announcement it planned a “special event” next week, coyly dropping hints it involved the iPod and adding in what some say is a subtle Beatles reference for good measure.
The announcement, which came late Tuesday, arrived after weeks of chatter on Apple rumor and enthusiast sites that the Cupertino, Calif., company will soon revamp its iPod lineup with as many as four new models. Speculation has focused on a video-playing iPod nano, a full-screen high-end iPod, and potentially another music-playing mobile phone.
Investors seemed to catch some of the fans’ enthusiasm. The company’s shares jumped 6 percent Wednesday amid a hot stock market that saw the Nasdaq gain 2.5 percent and the S&P 500 rise 2.2 percent.
Much of Apple’s stock gain probably was related to the overall market rally, said Tony Ursillo, an analyst for Loomis Sayles, a mutual fund company that hold Apple shares. But the rest was due to anticipation for next week’s event, he said.
“Apple always has the potential to pull something out of its hat,” Ursillo said.
The company did not say what it will discuss, but the invitation for the event in San Francisco included a picture similar to its iconic ads with a silhouetted person listening to one of its iPods.
“The beat goes on,” the invitation read. Some commentators noted that those were the final words in the last press release of the Beatles, a band whose music catalog has long been rumored to be an imminent addition to iTunes.
Of course, that’s also a Sonny and Cher song, so who knows?
Although Apple still dominates the market for MP3 players, its iPod lineup has started to seem long in the tooth. Other than adding new colors to its low-end iPod shuffle, the company hasn’t updated its iPod lineup since last fall, when it unveiled a completely new design for the shuffle and a slimmer version of the mid-range iPod nano.
The top-of-the-line iPod has remained largely the same for the last two years.
As the iPod lineup has aged—and as the company and consumers focused on its new iPhone—iPod sales have started to stagnate. The revenue Apple sees from iPods fell year-over-year for the first time in the spring quarter this year and was up just 5 percent in the just completed quarter compared to the same period last year.
That’s a far cry from the double or triple digit percentage sales increases the company posted as recently as the holiday quarter last year.
While dollar sales have flattened out, the growth in the number of iPods has remained healthy, indicating that the company is selling increasing numbers of its lower-end iPods, particularly the shuffles.
“Face it, the iPod is ready for an upgrade cycle,” said Scott Rothbort, president of LakeView Asset Management, an investment adviser in Millburn, N.J., that owns Apple shares.
That seemed to be the consensus on Wall Street, where several financial analysts put out bullish reports on Apple following news of the upcoming event. Goldman Sach’s David Bailey, for instance, encouraged investors to buy Apple shares, predicting that the company would post better-than-expected sales and earnings in its coming quarters.
“The almost certain launch of a new family of iPods next Wednesday ... creates another opportunity for upside in the back half of the year and provides another reason to own Apple shares,” Bailey wrote.
Investors seemed to follow that advice. Apple’s shares closed the regular trading on Wednesday session up $7.26, or 5.7 percent, to $134.08.