The Month that was Espana's

The World Cup in South Africa has now come and gone with the Spanish armada being crowned World Cup Champions. After a month long spectacle that saw Europe descend and then resurrect into the new football--um soccer, power the Oranje of the Dutch can only reminisce at what could of been after a hard fought, often literally, 1-0 World Cup Final Match.

Sports it seems has taken center stage of late, to the delight of BP (BP) which has seen it's stock drop 40% in the last three months as the Oil Spill, caused by the explosion of the Deepwater Horizon rig in the Gulf of Mexico continues to rage on. A $20 Billion expense net already set up by the company for damages and clean up, is a big chuck of change, even to big oil! But the biggest news coming to the state of Florida may not be the drifting oil slick but LeBron James.

The biggest name in Basketball decided to take his talents from Cleveland to Miami to play for the Heat franchise with fellow free-agents Chris Bosh and Dwyane Wade. A move that makes Miami the center of the basketball universe and puts the triumvirate within earshot of a sports dynasty.

But this time of year isn't just for Soccer tournaments and sports free agency, with the June quarter ending, earnings announcements will be gearing into full swing, especially in the technology space, with some of the biggest names like Google (GOOG), Microsoft (MSFT), Intel (INTC) and Apple (AAPL) expected this week and next.

With the economy and employment picture still at the forefront of a shaky market, there's a lot of questions about where the earning's growth will come from. Microsoft and Intel are set to benefit from a upgrade cycle of computers and software in the corporate space, especially the software giant from Seattle as it bangs the Windows 7 drum, to distance further and further from the previous and ultimately drastic under-achiever that was Windows Vista. Where as Google and Apple are capturing the mind-space of the consumer with highly successful smart-phone platforms Android and iOS respectively.

Apple's iPhone 4 launch was the most successful yet, selling 1.7 Million units in the first 3 days and adding to that 3 Million iPad tablets sold, in just under 3 months, and Apple investors continue to move towards higher and higher expectations. While Google's Android software is being pushed hard by phone carriers around the world, Google by giving its software away for free isn't exactly lining its pockets. What the company is banking on, is the ubiquitous nature of its search brand and mobile applications. An Android world means Google at the front and center of that many more mobile screens and quests for information.

The start of this summer and past the holiday weekends in North America have been dominated by the Sports pages, but now as the stadium lights dim on South Africa and the LeBron nuptials are signed, the focus shifts back to the markets and a slew of earnings releases and conference call transcripts to pour over and discover the next investment opportunity.

Disclosure: Author owns AAPL, GOOG

Money for Nothing (I want my Google TV)

No, the Internet Giant is not changing the vibe of the Dire Straits rock classic, but it is intent on being a new force in Television. At Google's (GOOG) I/O Conference today, the company announced its foray into the small screen world with Google TV. An eco-system of Internet enabled Television and Set-top boxes running the Android operating system and Chrome web browser.

Now, unlike previous Google announcements or releases, which many times reduce themselves to the happy-go-lucky whims and musings of the techie elite, i.e. lack any foundations in the business realm, this one is different.

With Android taking a strong position in the smartphone race, adding handsets and carriers every calendar quarter, and Chrome becoming the fastest growing browser on the Internet today, Google's in a position to bring partners on board with compelling offerings. Add to that, Google's ability to target advertising, and its willingness to share the honey pot, it's no wonder some big names jumped into Google TV. Sharing the stage with Google today were Sony (SNE), Intel (INTC), Adobe (ADBE), Logitech (LOGI), Dish Network (DISH) & Best Buy (BBY).

What Google TV is trying to be, is a solution to a problem that has plagued the Television world since the invention of the TV Guide. Program interfaces are and have always been atrocious, to a point where some cable system guides are almost unusable. When guides were only in print, hard to ask for much from a little magazine, but in the digital age to still be having this software problem is a black eye for the technology staples that make up the Cable & Satellite Industry.

Cell Phone interfaces had much the same problem, because there never was a need to innovate, and customers just accepted that using a phone was awful. It took Apple's (AAPL) iPhone to showcase what couple be possible when something is designed with the user in mind. And from that Phoenix, have risen many clones and competitors, the best of which arguably is Google's Android. By porting Android into Integrated Televisions from Sony and set top boxes from Dish and Logitech, all running on Intel's Atom line of processors, the goal is to move TV forward for the new Internet & Application age of today. Apple's iTunes-linking set top product AppleTV has been largely overshadowed at the company by the innovation and successes within the iPhone and iPad businesses, which has opened up a first-mover advantage and opportunity here for Google.

With Android being the platform for Google TV, the App Marketplace is also available and its library of 50,000 applications. Granted going from tiny cell screen to HDTV will likely require a majority of those apps to be re-written, but that base of developers is a key for the platform to gain traction, it'll also help if Sony sells a boat load of TVs.

A few key tidbits of the Google TV system include:
-> Ability to search across television guides and the Internet for television shows and films. This includes PVR functionality for future programming.

-> Ability to have television and the web in picture in picture mode, allowing Sports fans to look up box scores as the game is in progress.

-> Inclusion of popular social networking applications like Twitter or Facebook streams for currently watched programming.

-> Android devices can be used as remote controls.

-> On the fly Closed Caption Translation using Google's Translate engines.

Gizmodo has had coverage of the entire presentation here. (Link)

All in all an announcement is plenty of potential, a reasonable time line to market and a step in the right direction for the future of Television technology. Oh, and for Google investors, an advertising opportunity in that tiny sliver of the market, Television.

Disclosure: Author is long GOOG, AAPL

Sales Momentum ramps for Apple as iPhone powers earnings

Apple (AAPL) sells a couple products that it labels with the term 'magic', its multi-touch mouse and new iPad Tablet, but after the company's March quarterly earnings, reported Tuesday after the market close, sales of Apples seem out of a fairy tale.

Analysts Wednesday morning have been pushing over themselves digesting the news and raising price targets further. RBC now joins the highest estimate on Wall Street with its brand new price target of $350 for the Cupertino electronics company. Several other firms including Piper Jaffray, Oppenheimer and J.P. Morgan pushed through or moved higher than $300 as well. And after dissecting Apple's report there are many compelling reasons why.

First though, what about the quarter? Well let's recap expectations coming in and see just how handily Apple beat them.

Financial Metrics
exp. $12.06 Billion in Revenue <-> $13.5 Billion in Revenue
exp. $2.45/share in Earnings <-> $3.33/share in Earnings ($3.07 Billion in Profits)

Unit Metrics
exp. 2.7 Million Macs <-> 2.94 Million Macs
exp. 6.8 Million iPhones <-> 8.75 Million iPhones
exp. 9.0 Million iPods <-> 10.89 Million iPods

An astounding financial performance by any measure expected by Wall Street professionals. Apple's sales momentum is at an all time high and the product mix the company has to offer is striking the right chord with consumers even during a time when retail spending hasn't fully begun its recovery, due to continued high unemployment and the global economy's sputtering into growth.

The real story here is the strength of the iPhone. With the AppStore under its wing, the massively popular platform continues to grow in International and Domestic markets. Growth numbers are almost double overseas for Apple as it continues to add more carrier partners and branches into business models that include multiple-carriers in the same country, something it has yet to do in its home market, the United States. The upside surprise on iPhone sales, given its $600 Average Selling Price accounted for the vast majority of the $1.5 Billion in Revenue that Apple over-achieved this quarter.

But just to get back to the numbers, beating the street is one thing, but crushing expectations to this magnitude is quite another. Apple's own guidance is always conservative to the point where one wonders when they will stop giving any at all. For the concluded quarter Apple brass presented the street with ranges of $11 to $11.4 Billion in Revenue and $2.06 to $2.18 in EPS. The street's expectations were
5-9% higher on Revenue and 12-19% higher on EPS, so it's not as if Wall Street is just marching to Apple's expectations drum. The company however, does very well in controlling and managing expectations, it does well in controlling just about everything it can, well except for the massive leak of the next generation iPhone that was widely reported on gadget blogs and Apple faithful websites.

The fact that Apple beat the street's already higher estimates by 12% on Revenue and 36% on EPS is the kind of operational performance that makes the company among the most admired in the world, and leads to the collective fawning markets are seeing this morning with Upgrades and Price Target hikes. Of course Long Investors are just as thrilled about the 6% move in the stock to an all time high near $260.

The first 6 months of a new year are typically seen as 'seasonal' by the industry but the only thing seasonal now is the collective scrambling of Wall Street's major analysts in their re-writing of the rules of the road for Apple future estimates and valuations. In the press release, CEO Steve Jobs touted having several more extraordinary products in the pipeline for this year and so far the smart money's on the cats-out-of-the-bag 4th Generation iPhone. The company also has previewed its next iPhone Operating System, improved its high selling MacBook Pro line of laptops and is likely nearing the 1 Million in sales mark for its iPad device after just going on sale mere weeks ago. The upcoming quarter includes the launch of the iPad with 3G networking, the International launch of the iPad and likely invitations for the next iPhone announcement, expected in June.

Apple continues to be a must own Technology stock and one that is running with a Sales and Product tailwind unlike any in its history. But with all the love, who's left to buy it? With quarterly performances like this one, somehow, somewhere, investors will continue to be found.

Disclosure: Author is long AAPL

Final Four ready for Indianapolis

For CBS (CBS), this year's NCAA Men's Basketball Tournament has been a resounding success. March Madness proved to be just that in the early rounds of the tournament, with several high profile upsets, Overtimes and nail-biting finishes.

CBS television ratings have generally been the victor, beating American Idol on the first night of the tournament and hardly looking back. Another success story for the College Basketball brand and network, it's online free-for-all. Each year, March Madness on Demand has exhibited exceptional growth. The completely free ad-supported streaming model had 30% growth over 2009, which is nothing to sneeze at. That equates to 3 Million unique viewers who watched 3.4 Million hours on the first day of the tournament alone. Consider also the streaming iPhone app was a top seller and this online thing is starting to really make a bit of money for the old network.

With the Final Four this year being a balance of known and unknown -Michigan State, Duke, Butler and West Virginia- CBS is hopeful tournament momentum carries it throughout the weekend games and National Championship for another successful and exciting College Basketball Championship.

Also on tap for this weekend, Apple's (AAPL) highly anticipated launch of the iPad, the table computer based on iPhone software that has been selling out pre-orders all over America. Analysts are increasingly bullish on sales prospects for the iPad with initial first year shipment targets moving from 3-5 Million into the 8-10 Million range.

According to one analyst, Katy Huberty of Morgan Stanley, who has been written about here before and let's face it hasn't had the best of records when it comes to Apple picking (Link), Apple's suppliers are on pace to build 8-10 Million units this year and each Million sold will represent an additional $0.25/share in earnings. It has been this bullish tone lately with the iPad that has pushed Apple shares to all time highs in the $230s.

Disclosure: Author owns AAPL.

Digesting Apple's Pie... and Tablet

A certain Cupertino company, best known for selling a few computers, music players and telephones, had all of Wall St. in a frenzy yesterday as it announced quarterly earnings for the December quarter. A Christmas quarter that was wildly expected to be the most profitable in history for Cupertino based Apple Inc. (AAPL).

Expectations were inching up until analysts had settled on Income of around $2.10/share and Revenue of about $12Billion. Apple's reported numbers came in at Income of $3.67/share and Revenue of $15.7Billion, and that's where the confusion began. Just at a glance it seems something isn't right or analysts had spent too much time in the sun. Exchanges halted the stock in after-hours trading yesterday as Apple officially changed its accounting presentation to remove the controversial "subscription model" for iPhone and AppleTV sales.

With subscription accounting, due to the nature of free software upgrades, Apple has had to account for iPhone and AppleTV sales over a two year time frame, breaking up all related Revenue and Costs and lumped the rest in a deferred item on the balance sheet that caused analysts headaches and long hours at the calculators. When Wall St. still struggled to properly value this cash-generating machine Apple provided non-deferred numbers alongside the official GAAP figures. It also petitioned the standards boards to get rid of the subscription requirement.

In September 2009, the company got its wish and is now able to report Revenue and Earnings with minimal "subscription" effects (A nominal estimate representing the value of future software upgrades, which for Apple represents $25/iPhone and $10/AppleTV). The company decided that starting its new fiscal year was the prudent time to put this practice into place and the Wall Streeters were certainly caught off guard. When Apple stock resumed trading the price activity was very mixed until finally settling into a minimal after hours gain.

So that's the logistics of accounting, but what about the quarter? Apple certainly had its pie and is enjoying every bite. A record quarter in terms of profitability and Revenue starts off another successful year for the electronics maker.

Revenue: $15.68Billion vs $11.88Billion year over year.
Earnings: $3.38Billion or $3.67/share vs $2.26Billion or $2.50/share year over year

Mac Computer sales were a record at 3.36 Million units, besting the previous mark by 300,000, highlighted by the recent introduction of the new iMac desktop line.

iPod sales came in at 21 Million units, down slightly but well expected by the company as this market matures. The silver lining in the iPod numbers is the 55% growth rate in iPod Touch sales, bringing up the Average Selling Price of the business unit.

iPhone (which by definition is also an iPod) sales grew by 100% to 8.7 Million units, a quarterly shipment record, which should be noted was below the 9 Million unit consensus estimates. Some iPhone sales targets were even higher but increased competition in the space and a muted start in China is likely to blame for the shortfall. Another point to consider is the inventory channel, of which Apple is said to be one of the most efficient in the space. The company addressed this on the their conference call by re-iterating that its inventory channel is counted in a more conservative manner than competitors. The real kicker, the Average Selling Price of iPhone is $620!

It's usually the guidance game that is important to analysts and investors when Apple issues quarterly reports, however, during this announcement all eyes were and are awaiting what the company will showcase at its media event on Wednesday. Apple executives throughout much of the conference call almost gave the impression of toying with analysts, while likely secretly passing notes back and forth along the lines of "wait till they get a look at iPad"; or whatever the Tablet eventually is crowned.

The usual Apple hype machine is reaching fever pitch again and is strikingly reminiscent of the time just prior to the MacWorld keynote speech in 2007 when Steve Jobs unveiled the first iPhone to the world. News tidbits are flying out from several sources that Mr. Jobs claims the Tablet is the most important thing he's ever done, and in his customary quote on the quarterly press release he re-iterates that this week includes a new product release the company is very excited about. COO Tim Cook stoked the fires further on the conference call when asked about new product opportunities: "I don't want to take away your joy and surprise", referring to the planned Wednesday event. When Tim Cook, Apple's guru of manufacturing, retail and supply chain managment says "joy and surprise" there must be something special about this new device.

For one thing, Apple certainly have mastered the art of getting people interested and getting them in the room to have the conversation. Will the tablet be the be-all end-all of casual computing? A device to be left on the coffee table, used by anyone to control just about any media and anything electronic in their homes? Lots of questions remain and should be answered by the time Steve relents his magic wand by walking off that stage Wednesday. One thing is clear as day, and that's Apple's ability to cash in on their design prowess and excitement generation. The company took in a tidy sum last quarter, generating only about $5.8Billion in cash!

Disclosure: Author is long AAPL

Research In Motion Regains Footing

Some difference 3 months can make. Research In Motion (RIMM) stock 3 months ago was bearing the brunt of sell-off at the behest of disappointing performance and guidance, dipping from the mid $80s to the high $60s per share. The stock had mostly held water of late, sliding slightly to the low $60s but was in a position to change all that with another earnings report.

With the increasing competition from Apple's (AAPL) iPhone, Palm's (PALM) Pre and heightened marketing given to several smart-phones running Google's (GOOG) Android software RIM had to deliver, on all fronts, and it has. Blowing past all expected metrics is leading shares of RIM higher by 11% early in after hours trade.

The lines: Revenue of $3.92Billion vs $3.78Billion estimated; Income of $1.10/share vs $1.04/share estimated; Subscribers at 4.4Million vs 4.1Million estimated. RIM also shipped 10.1Million units during the quarter, including a milestone generating 75Millionth.

Seems the analyst talk of RIM's mighty fall via the dual-pronged iPhone/Android sword will have to wait for the time being as the folks from Waterloo can pop the bubbly for at least another quarter as going into the Christmas season the guidance RIM provided was very strong. Revenue of $4.3Billion vs $4.11Billion and EPS of $1.27/share vs $1.12.

So, with RIM so firmly positioned, what's wrong with the company and why isn't it a must own in the growing smart-phone industry? Two main reasons: Interfacing and Extensibility.

In interface design RIM is not even close to the same league as Apple, let alone the various flavours of Android that are appearing in the market-place. The company has such a culture entrenched in the corporate world that functionality for the consumer has always seemed like an after-thought with the current incarnations of the BlackBerry OS. This was most evident in both versions of the touch screen device Storm that the company debuted to scolding and muted critical response.

In regards to extensibility its hard to call RIM's platform a leader in any sense of the world. Its BlackBerry App World platform is another after-thought and in the days of the highly successful iPhone/iPod Touch AppStore, being an afterthought is just about being dead in the water. While Android is still nowhere near Apple's 100,000 applications catalog, it is getting there with over 16,000 available for various handsets. In this race RIM is already well-behind.

But there is a silver lining, the company makes very good looking hardware, for the most part, and is a staple in the corporate world, which is a business that isn't going anywhere and will grow with the rise of smart-phones world wise. Prospects continue to look good, and if the engineers can get their software act together for a new version of the BlackBerry OS, it really can be a 3 pronged fight in the mobile space for the decade to come, and that kind of potential will have analysts and investors eager to jump on board.

Disclosure: Author does not hold any position in RIMM, is long AAPL, GOOG

Markets fading to start December. What's in store for Christmas?

The first week of December has been one dominated by the sordid affairs of Professional Golf's most notorious figure, and as the rumor mill churns to fill gossip websites and supermarket rags, critical economic, fiscal and international issues are bumped to Page 2. So let's take a look back at what's been making the rounds.

The President of the United States, Barack Obama, always seemingly juggling several critical agendas, has his work cut out for him as he steers the US Senate in the Health Care debate behind closed doors, outlines a plan to send 30,000 more troops to support the War in Afghanistan and holds a Jobs Summit to deal with unemployment. The administration hopes to deploy unused or paid back Financial Bailout Money to support small businesses in lending and hiring and to ignite country wide infrastructure and energy efficiency projects, and to top that all off, newest laid out plans call for the creation of the biggest government transparency project in the Nation's history.

Certainly an ambitious agenda that is sparking controversy from either side of the American political aisle, but as Health Care is being actively debated in the floor of the Senate a passage of a reform bill seems ultimately likely. As for jobs, a very positive report for November had the US losing only 11,000 jobs in that month, with further reductions in previous month loss estimates. A far cry from the over 700,000 per month that were lost in the early parts of the recession. Still, with unemployment sitting at 10% of Americans something more has to be announced and followed through by the Administration.

On the market's side, the recent rally in Gold finally hit a bit of a stumbling block as the US Dollar found some fitting via comments from Ben Bernanke and the Federal Reserve. An interesting trade on gold has been a double gold short fund, PowerShares Double Gold Short (DZZ), posting a 15% gain over the last 5 trading sessions, including a 4% gain Tuesday. As economic footing returns and the possibility of rising Interest Rates in the US into next year this is a really interesting speculation play on a breather in Gold's record rally.

Bank Of America (BAC) has indicated its intention of paying back $45Billion in financial rescue money it had received from the Government as part of the Troubled Asset Relief Program (TARP), leaving its banking brethren Citigroup (C) and Wells Fargo (WFC) still without plans for re-payment.

Technology news of the day has several firms in the spotlight. Google (GOOG) has recently hosted an event in which it showcased several new search initiatives including real-time search, which include public updates from social spaces such as Twitter and Facebook, a Google Goggles tongue-twister project, which allows mobile phones running Android, and soon other platforms to take photographs of virtually anything and get legions of information back to the smartphone.

Apple (AAPL) has purchased music streaming service Lala, which for all intensive purposes seems to likely fit into the mold of furthering a cloud based iTunes architecture and perhaps a streaming alternative to the pay for download model the company has currently been enjoying. With all eyes on a potential tablet offering from the electronics company, several publishers are already lining up to create a joint venture that will put the likes of Sports Illustrated and Time magazine in specific new tablet formats with advanced interactive and connectivity features.

In the entertainment world Activision Blizzard (ATVI) set all sorts of records with the release of Call of Duty: Modern Warfare 2, selling pretty much a bazillion copies of the popular franchise video game and making more money in 24 hours than any other release in the history of entertainment.

As Christmas comes around the corner, in the retail and tech space it'll be interesting to see what the must-have gadget of the year is to be. Will the iPhone dominate again, will console wars push to new sales highs, will consumer spending continue to rise as the jobs picture improves on a bedrock of subtle economic growth?

This time of year always seems to set traders into a bullish mood, and that will be especially true if reports of record bonuses from the financial industry continue to ring true. But just remember, Goldman Sachs (GS) can't be blamed for everything, or can it?

Disclosure: Author owns C, GS, AAPL, GOOG

GPS Investors flee from Google's Shadow

Google Navigator, a seemingly natural extension of existing Google Maps technology that's found on smart-phone platforms like the iPhone and Android, has GPS company investors running from the hills.

The issue isn't that the technology from Google (GOOG) is significantly better, it does look very good and would be a formidable competitor, the issue is Google's affinity to price all-things-Internet at $0. Considering Navigation subscriptions run in the $100s of dollars/year, not to mention the cost of the units themselves, how many GPS users would turn to something else from, for now, trusted Google at zero cost that works on their existing cellular phone? I'd bet many, and the market is betting that way too. Gizmodo (Link), the technology blog, has an informed quick review of Google's entry into the Navigation business.

The sell-off in the market has certainly contributed to some of the downfall in GPS stocks, however major players Garmin (GRMN) and TomTom (TOM2) are down 16% and 20%, respectively.

The age of convergence in technology is certainly upon us, better cameras are coming to cellular phones, better media players are already there, and now GPS navigation capabilities are becoming mainstream. The stand-alone technology gadget/device is becoming a niche rather quickly.

Android, the free open-source cellular operating system developed by Google, is taking off by leaps and bounds this year, with several high profile phones on tap on high profile networks, such as Verizon (VZ), AT&T (T) and T-Mobile in the US. The platform, which recent research has predicted, could overtake the popular Apple (AAPL) iPhone in market-share over the next few years, needs applications like Google Navigator to be exclusive on enticing handsets in the months to come. The Momentum is building for Android and Google is keeping the fire lit with its Navigation application.

The only problem for investors, Google doesn't want to charge for anything but advertising! In all likelihood however, this is the next step in Navigator's life cycle, and Google can continue its march into dominance of the mobile ad industry, just as it has trounced the competition in search.

Disclosure: Author owns GOOG

Apple's Earnings Aftermath

By now the news media has digested the rock-solid quarter from the Steve Jobs-led-innovative bunch in Cupertino, so now its time for the experts to weigh in. First, here's a simple recap of Apple's (AAPL) quarter.

$1.67Billion in profits ($1.82/share) on $9.87Billion in revenue, which compares to $7.9Billion in revenue and $1.14Billion in profits ($1.26/share) a year ago. Considering the street was anticipating $1.42/share, with a whisper number in the $1.60s/share, this is quite the professional thrashing. Even the highest estimate on the street was left in the cold in the $1.70s.

The real kicker here however is when Apple accounts for iPhone sales right away and not under the subscription method. In that instance the company earned $2.85Billion on sales of $12.25Billion. Clearly this company can not be priced based on P/E valuations.

Now for the sales figures.
3.05Million Macs (A new quarterly record)
10.2Million iPods
7.4Million iPhones

All impressive in their own right, considering iPods are by all accounts supposed to be dying off, and iPhone 3GS supply was limited most of the quarter. I'd speculate Apple wants to stock up for the Christmas season now as it steps into its newest market, China. The 3Million Mac number is most impressive, as the company beat its previous quarterly record by 400,000 units, and its not even the Christmas season yet.

Apple has just also announced 2 new iMac desktops, starting at $1200 a newly redesigned entry-level MacBook at $1000, and 3 models of the Mac Mini, setting one of the up to be a home media server type device. This refresh of the desktop line is sure to spur holiday sales into a segment that has been stagnant for sometime as laptops dominate computer sales. In what's still considered a recessionary environment, Apple stands out as a testament to quality, design, innovation and marketing power. The quarterly performance definitely can't be argued with.

The pros had their say before the quarter and the market had its say boosting shares to all time highs over the $202 mark. What do the pros say now? Higher price targets and upgrades galore!

A who's who list of tech analysts that includes firms such as Piper Jaffray, Oppenheimer, RBC, Carris & Co., UBS, Needham & Co. have reiterated, upgraded or raised targets on Apple with UBS being the highest at $280. The love-fest with the electronics maker didn't stop there as targets came in at $277, $275, $260, $235 and so on. Although the numbers the pros give vary, one thing was common-place. Apple is a must-own tech bell-weather.

Just think when they change their accounting! Over the last 4 quarters, non-adjusted profits total $9.77/share vs $6.11/share under GAAP. Roughly a P/E of 20 (now that this calculation makes sense)!

Oh, and the company now keeps 19% of its market cap, about $34Billion in cash in its bank vaults.

Disclosure: Author owns AAPL

Apple's Gunning for Records with September Quarter

As analysts line up their predictions for Apple's (AAPL) upcoming quarterly earnings report, one thing stands very clear. Records are made to be broken. In the quarter that saw the continued success of iPhone 3GS, price cuts on Mac Computers and a slew of upgraded or new iPods, the company is firmly poised to deliver its best back to school season ever. Apple's typically conservative guidance for this quarter called for earnings in the range of $1.18 to $1.23 in profit/share on sales of $8.7 to $8.9Billion.

Standing in stark contrast are analysts with Revenue figures at $9.2Billion and profits of $1.42/share on average. Apple over the last few years has beaten earnings expectations by a staggering 39% and Revenue by 7%. Perhaps the analysts have caught up this time? Not yet. 90 days ago the average estimates stood at $1.27 and have climbed since to $1.38 and where it currently stands at $1.42.

But, since when do analysts really have a handle on the hot trends of the day. The Apple generation of the 2000s have grown up with iPods being a must-have, the Mac as a must-have College tool and now the iPhone as the it mind-share capturing device. But analysts, like most things come in all shapes and sizes and estimates, certainly for Apple, can vary wildly.

On the Computer front, expectations have risen for Apple to sell upwards of 2.8Million machines, a new record for the company. In the year ago period, that number was 2.6Million. While iPods are slowly an eroding business, another 10Million units are expected to cross hands, and the stunning growth of the iPhone business will continue with estimated sales of about 7Million units.

While Apple's been dropping prices on Macs and iPods to maintain sales and grow share, it has plenty of room to keep margins steady as the iPhone is by all accounts a profitable monster, and the launch of Snow Leopard software adds to the margin story. Taken altogether and the pros are calling for continued sales success at Apple.

Whether the market believes it too is the next test.

Disclosure: Author owns AAPL

Drop In Jobless Claims Fails To Ignite Market

In what by most is seen as good news the job market showcased another data point in its long march towards stability. Jobless claims fell by about 20,000 to 530,000, which was slightly better than the 550,000 expected by economists and analysts.

Another rather important metric, continuous jobless claims (people making claims for longer than a week) fell by 123,000 to 6.14Million. These data points are giving economists positive signals that the job market is getting better, but cautious optimism aside, it also shows how much further there is to go.

The major benchmarks in the US opened slightly positive on the news but have since turned negative with the Nasdaq leading with a 1% decline.

In other news, some technology companies might to ready to appear more attractive to investors as what some call the "Apple rule" has been reversed. The required method of subscription accounting when dealing with hardware and software sales, most notably put into practice by Apple (AAPL) with its iPhone, will no longer be so as part of Generally Accepted Accounting Principles. This change allows Apple to record Revenue and Profit from iPhone sales in real-time as opposed to being force to account for each unit sold over a 2 year period. Amazon (AMZN) uses the same method of accounting for its Kindle e-book reading device and Palm (PALM) had adopted the method for its flagship Pre smartphone.

Why Apple is most noted for this change is relatively simple, it moves a staggering amount of iPhone units, at high margins, fueling renewed growth rates. Under the new standards, Apple is expected to report profitability that is 35-40% higher than it is currently allowed to. Fundamentally, there should be no change to the value of the company, simply a change in the accounting books, but for many P/E based traders and quantitative computer P/E based models, Apple will appear more attractive under these ratios. Amazon, Palm and other companies dealing with this change will not have their metrics altered nearly as much as Apple is expected to.

Disclosure: Author owns AAPL

Technology leading market's rally, a pause ahead?

The 52 week high list looks like a who's who of dynamic companies, with the list being dominated by some of the best and brightest in Technology. The Nasdaq has outperformed its peers on a year to date basis and as several analysts predicted, it is the tech sector that is leading the rally.

The Nasdaq's Year to Date performance gains of 34% dwarfs the gains put up by the S&P (18%) and the Dow Jones (11%). Even looking at the gains since the lows of March, the Nasdaq and technology is still the driving story for the market. Nasdaq at 68% leads the gains of the S&P at 60% and the Dow Jones at 51%. Either way, the bull market rally since March, on the back of the idea of recovery, and finally improving GDP numbers has been broad and long. The Bulls have been on a 6 month celebratory train, but will it last and is Tech's run over?

Not quite, the road to recovery, while already swift due to massive government intervention, still has to play its course and incite a recovery in the job market. Unemployment in America is still rising, though not as quickly, towards the psychological 10% mark. If job creation instead of job losses show up in the remaining quarter of the year, market bulls will have more reason to bang their chests, and more importantly, put their wallet where their mouth is.

Secondly, the housing sector still needs to improve. Articles on the Huffington Post and other sources, are already touting that banks are going back to packaging risky loans, and many analysts are waiting for the other shoe to drop when it comes to commercial real estate. While some may scoff at the success rate of the White House loan modification program, the last estimates put the percentage of home owners helped with refinancing at 13-15%, the fact is there are some getting help. Housing starts were lower than expected most recently but this has been a metric that has consistently come in higher than expectations.

Now, about those 52 week high names. Well technology giants Apple (AAPL) and Google (GOOG) dominate the list, while other techs such as Ebay (EBAY) show up, and even others such as IBM (IBM) and INTC (INTC) are just off those levels.

The prudent thing for the market to do and investors to do would be to take a breather after such a scorching rally of late, however, as market participants are keen to know, markets stay irrational for longer than expected.

Disclosure: Author owns AAPL, GOOG

Can Motorola follow the Palm path?

In a bit of Deja Vu, the conscious feeling not the forgettable Denzel suspense film, Motorola (MOT) is attempting to pick its phone company off of the balance sheet floor with an attractive new handset. Investors have just seen this same story with PDA legend Palm (PALM), as it used hype from its Pre handset unveiled in January of this year to move the stock from $4 to $14 and save a business that was clearly heading in the wrong direction.

The battle in the smart phone marketplace is very heated, with entrenched competitors Apple (AAPL) and Research In Motion (RIMM) slowly gaining market share but gathering much of the mind share, and more importantly most of the profit margins. Recent stats show those two juggernauts grabbing just 3% of the overall cellphone market but an astounding 35% of all industry profits. And for good reason, the companies sell very expensive but heavily subsidized attractive smart phones.

Motorola, which has been in dire financial shape quarter after quarter for what can only be described as forever, hasn't had a hit in the cell phone space since its popular RAZR handset, and is desperately trying to compete in the profitable smart phone segment. By gutting through a lot of the company, and doing away with historically bad Motorola interfaces the company turned to Google's (GOOG) upstart Android platform for its resurgence.

Android, by all accounts is gaining significant traction since the first HTC handset launched nearly a near ago. The platform has been featured in 3 additional phones headed in the US thus far and rumors peg the number of Android handsets at 20 into 2010. This contrasts with the handful of RIM models available and the 2 current selling versions of Apple's iPhone. Motorola is betting with a lot of the industry that the free Android platform can eventually be as compelling and competitive in an industry feeling the need for consolidation in what is becoming an age of mobile applications. If your phone doesn't have applications available its simply not as good, and the beauty of Android, as far at Moto is concerned, is that it doesn't need to worry about pumping resources to create an application hub. The reach of Google is already doing just that, granted it is nowhere near the size of Apple's AppStore, but Android does boast the 2nd biggest mobile application catalogue. Nothing to scoff at.

Enter the Motorola Cliq, the world's first social phone, as the company claims. The phone is built on Android, but Moto's designers have layered an interface that directly ties in a user's Facebook, MySpace and Twitter contacts and status information. The social aspects of the phone are sure to resonate with a younger smart phone buying public and Motorola has shown it can indeed build something of higher quality. Will the phone be able to compete in the space? Sure, but will it gain any significant market share? At least one analyst seems to think so, as a note was published putting 4th quarter Cliq sales at about 750,000 or an estimated 5% of Moto cell sales. 5% may not seem that significant, but with a hefty subsidy, Motorola could start to see some real revenue from its new headlining handset. And after all, Moto essentially bet the company on Android less than a year ago, so we're guaranteed to see several handsets leveraging the new interface.

While specs are impressive, price will be a key differentiator for consumers. In the age of the $99 iPhone 3G and the higher capacity $199 iPhone 3GS, it is sheer lunacy for other players to think they can charge more and gain any sort of traction with consumers. Thus far though, Investors are jumping in and believing in the robot that will eventually have come to save Motorola from the brink. Shares are up 7% today and gained more than 10% since the device was officially announced. Here we go again?

Disclosure: Author owns AAPL, GOOG

As more go back to school, less are out of work

The Labour Day weekend in North America was met with a Friday stock rally based on encouraging employment figures that saw 216,000 jobs lost in the month of August. Although 216,000 is still a significant number out of work this trend of a decline in job slashing, a figure that was upwards of 700,000/month at the peak of the recession, led investors into confident buying to start the long weekend. Furthermore, Canada's job picture actually showed job growth in the tens of thousands signalling a shift out of the recession and leading the TSX Composite Index to new highs for the year.

Tuesday's morning action continued the trend, as market's saw green in the early going, this time fueled by commodities, especially gold, with prices around $1000/ounce. Major market benchmarks were all higher between .5 and 1% with the S&P leading the way.

America's battle for Health Care is taking a more dramatic turn this week as President Barack Obama issued a strong pro health care reform speech to the labor force and is set to speak again to Congress on Wednesday as the health debate enters its final stretches.

Kraft Foods (KFT) is taking a bit of a beating today as it issued, and was quickly rejected in a $16Billion bid for Cadbury (CBY). It's clear investors want more out of a takeover bid, with analysts already speculating the Chocolate maker could fetch near $21Billion if another suitor was found to compete. Shares of CBY are up nearly 40% giving a market cap well over $17Billion, so it seems traders are sharing the investor sentiment for now. Shares of Kraft slid 5% on the news.

Also on tap tomorrow is an annual iPod-related event from Apple (AAPL) as it brings the media over to showcase new iPods and possibly a new version of its iTunes software. Rumors have been rampant as usual for an Apple event, and although the fabled tablet computer is unlikely to appear, new iPod Touch and iPod Nanos are expected to the sporting cameras for easy on the go pictures and videos. Shares of Apple are up almost 1.5% today but are expected to fall following the event unless Apple can surprise with a new announcement of some kind.

Disclosure: Author owns AAPL

Apple-China deal struck: iPhones official

China Unicom (CHU) and Apple (AAPL), after months of negotiations and several false starts, have completed a deal that will flood the Chinese market with legitimate iPhones before the year is out. China Unicom is building out its 3G network that will be ready by the end of the September for most of its 140Million plus subscribers, which is the biggest cell market that Apple has ever rolled the iPhone out into.

The uncomfortable love triangle that Apple found itself within in China was one that it had to complete for the continued dominance of its ubiquitous handset. China Mobile (CHL), the biggest carrier in the country with almost 500Million subscribers, was also in the running but several public disagreements with Apple over revenue sharing and control of the AppStore, made a deal impossible for the Cupertino electronics & design company.

Apple had to make a phone specific to the marketplace in China, with a mandate that wi-fi be removed from the iPhone, but for a market that size the company was willing to make concessions. The deal with the second largest carrier, Unicom, will allow Apple a foothold into the vast, electronic friendly marketplace, where several estimates have placed "grey-market" iPhones already in the country at more than a million units. With the country getting an official retail and distribution channel for the popular device, it will be interesting to see how the consumer in China responds to pricing and rate plans.

Like most "exclusive" deals that Apple strikes, there are certainly levels of buying the carrier of choice will have to make. That part of Apple's iPhone deals have been reported in several other markets like Russia for example. Apple did not get any revenue sharing in this agreement and the phones will simply be sold by China Unicom with subsidies. Reports have been denied that already 5Million units were ordered, but speculators have suggested that this number is quite reasonable, and in some cases underwhelming as it accounts for less than 1% cellular market penetration.

Playing with shipment volumes aside, the iPhone coming to China is a huge deal for Apple and its earnings going forward. The market in China of cellphone users will bump Apple's global addressable market significantly and even if sell-through rates do not meet expectations due to the rampant "grey-market" the channel fill will certainly help Apple's unit shipments and Revenues substantially. In the last quarter, the iPhone 3GS was launched, selling 1Million units in a weekend, leading to 5Million units sold in the quarter, a quarter that was largely applauded by Wall St. So how many will Apple sell in this quarter and the next as iPhones get bought and paid for by the company's Chinese partner? The answer I would think is at least 5Million on top that had previously been reported and debunked, if not significantly more.

Disclosure: Author is long AAPL

Apple earnings on tap after Tuesday's close. [Update]

Update: Apple's reported earnings included.

What can Apple Investors and traders expect after the bell today as one of tech's giants reports its June quarter? Well if one thing is certain with Apple, each line of business will be speculated on ad nauseum starting at about 4:30PM Eastern Time.

Likely much of the focus will be on the Mac and iPhone businesses. New price cuts for Mac Computers were implemented recently and according to shipment data and analyst reports, this could be a driver for higher unit sales and perhaps, less than hopelessly conservative guidance for September. The launch of the iPhone 3GS was a great success in the middle of June, which will likely prop unit sales significantly above previous expectations, however comparisons against the iPhone 3G launch are far more difficult as its launch window fell at the beginning of the July-September quarter of last year.

Of course, analysts will ask the company about Steve Jobs, who returned to work towards the tail end of June, after a 6 month medical leave. The company has come under intense scrutiny for not commenting on the health of its CEO, however, it goes without saying everyone in the extended Apple community hopes for good news for a long time to come on that front.

So, to the quarter. The average analyst estimates paint a picture of Profits at about $1.17/share on Revenue of $8.2Billion. Slowly as the quarter has come along, analyst numbers for Apple's unit sales have crept up and with that too went the Revenue target.

Year over year comparisons vs estimates for the quarter are as follows:

• 2008 Macs: 2.496Million Units vs 2009 Macs: 2.5Million Units
• 2008 iPods: 11.011Million Units vs 2009 iPods: 9.5Million Units
• 2008 iPhones: 717,000 Units vs 2009 iPhones: 5Million Units

Actual June quarter 2009 Unit Sales:

• Macs: 2.6Million Units
• iPods: 10.2Million Units
• iPhones: 5.2Million Units

Now, with Macs expected to be roughly the same in terms of units and iPods down year over year, the real growth story is the iPhone. A year ago, there was incredible pent-up demand for the iPhone 3G, which led to the units sales figures in 2008 for the quarter. This year, analysts are far more optimistic with the iPhone, and have already had some help as Apple announced first weekend sales figures of the iPhone 3GS at over 1Million units.

While those 3 major product lines represent the bulk of Apple's cash creation business, not to be overlooked are the percentage of revenue that is derived by iTunes, the AppStore, Software and other accessories. Last year the Music, Software and Other categories of Apple's business represented $1.76Billion in Revenue.

Revenue Breakdown for June quarter 2008

• Macs: $3.60Billion
• iPods: $1.68Billion
• iPhones: $419Million
• Music, Software and Other: $1.76Billion

iTunes continues to grow as the online music destination and the AppStore which had no presence a year ago has gone on to become the biggest software platform in the world today with over 1.5Billion applications downloaded. Yes, most applications sold are "free" and Apple makes very little profit from this even with its 30% share of Revenue, but this drives adoption of iPhone and the more expensive iPod Touch units which drive margins higher.

While it will be hard to maintain gross margins of 34.8% given price cuts on the Mac line and the back to school iPod Touch promotion, it is possible for Apple to maintain these levels given the increased presence of the iPhone in terms of Revenue and Profits.

Total iPhone units sold to date represent 21.17Million Units and with another 5Million units estimated in this quarter it'll bring the total to about 26Million units sold to date and given Apple's deferred Revenue accounting this running total is very important as all iPhones are still contributing 1/8th of their sale price to this quarterly report.

WC Power Tech Fund Investment Blog Revenue estimates for Apple's Quarter:

• Macs: $3.3Billion in Revenue vs. Actual Mac Revenue of $3.329Billion
  
• iPhone: $2.1Billion in Revenue vs. Actual iPhone Revenue of $1.689Billion
  
• iPods: $1.25Billion in Revenue vs. Actual iPod Revenue of $1.492Billion
  
• Music, Software and Other: $2.1Billion in Revenue vs. Actual Other Revenue of $1.827Billion
  

All told, $8.75Billion in Revenue, given similar margin treatment as a year-ago, which brings profits on 890Million shares outstanding to the $1.40/share level. If this is similar to what Apple officially brings to the table today after the close, the bulls on the stock, will have something to continue to cheer about, despite the increasingly hollow guidance-chasing game.

Apple's results:

• $8.34Billion in Revenue
  
• $1.38 Basic EPS (890Million Shares) & $1.35 Diluted EPS (909Million Shares)

Disclosure: Author owns AAPL.

Google's Vision of Life to be Subsidized by Advertisers

The techno-worlds of open-source and standards-compliance are united in celebration on the heels of Google's (GOOG) announcement of a new and upcoming platform called Chrome OS. A new giant has awaken to try and breach the Windows stranglehold of the modern world. Free and widely available Linux couldn't do it, the fawned-over and renowned Mac OS X still can't do it, but perhaps the quirky little giant that is Google can lead a way towards universal, free and open salvation.

Google's announcement that it is in fact working on a full fledged Personal Computer Operating System shouldn't really come as a surprise given that over the past year and a half it has launched the Android OS for Mobile Devices and Chrome, the first browser to have individual process management, a staple of every flavor of operating system in the modern computing world. Rumors of Google's OS work span back years in the blogosphere, but nothing was concrete until today's unveiling of Chrome OS, an operating system to run on full household computers based on Google technology and an open source Linux under-pinning.

By marketing this move into Operating System territory on the back of its growing Chrome browser user-base, Google is squarely taking a web-centric view of the computing world. Coincidentally, after years of perpetual beta, Google removed the beta label off of several products in its Apps suite, charting a path towards an enterprise serious attitude that the company has of yet never employed. First Google Apps gets a fresh coat of grown-up paint and now Google eyes the netbook market as the first for its full fledged operating system. Microsoft (MSFT) better not turn a blind eye to these threats like it has to others who have tried to vault into its dominant space.

After mostly shrugging off Apple's jabs at Windows Vista and watching itself slowly but surely lose some market share, it still took the worst worldwide recession in generations to get Microsoft's attention to start firing back at competitors. This is a company that cannot afford to rest on its laurels, nor one that can afford to blow dollar after dollar in a blinding struggle for relevance in markets that it is an also-ran in (i.e. Internet Search). Google's head on assault began years ago as it made the web (and inherently itself) the first destination for millions of computer users, then it got them hooked on a new way of looking at e-mail, then followed that with calendars and slowly simple documents and spreadsheets, all while being dismissed by market leaders as too simple or too weak for real use. Newsflash to those competitors: Majority of people only really need simple and weak, and powerful office suites and complex operating systems exist on most computers because there was no other choice!

The web browser is the portal to the new technology world and Google, Microsoft and Apple (AAPL) all know it, however Google's become the most nimble of the three at being able to adapt to it. Chrome was a starting point, and while getting 30 million users in 9 months is a good start, it is still just a tiny fraction of the web population, so Google's got a long way to go before it can claim the browser Chrome a success. Chrome OS on the other hand is a different animal, it'll be the only thing users need to get up and running on a new computer while having simple native tasks be quick and web tasks even quicker. As new web technologies evolve along with the growing presence of "offline" web apps, there was still always a need to have some distinction between the browser and the operation system. That line is blurring and perhaps Google's figured this out and may just have found a way to combine the two under Chrome's umbrella. Brilliant, if it were available today, but unfortunately for Google and its users the creation of a platform needs the help of several building partners, since no one buys an operating system off the shelf these days. Except of course for loyal Mac purists, which love having their Mac OS X be the latest and greatest, and given Apple's pricing commitment to the next version of OS X its a hard upgrade to pass up. Kudos to Apple for figuring out people can still want to buy software off the shelf.

$29 for a new version of an operating system, that's an incredible price from the folks at Cupertino, and something Microsoft's bean-counters certainly cannot match with Windows 7. However, someone can, and that someone is Google! Chrome OS, like the Chrome browser, is of course based on open-source software, and in and of itself will be open-source, just like Google's Android OS is for mobile phones. What that means is that Chrome OS will cost NOTHING to computer manufacturers who will shoe-horn it into the netbooks/laptops/desktops of the future. Tough to compete with free! Especially if its quality free from a source as reputable as Google.

But herein lies the rub, what's in it for Google? All these free services and platforms can't just be a secret desire to topple the greatest technology behemoth of all time, can it? Of course not, Google's clearest path to monetization is to get users onto the web as quickly, efficiently and distraction-free as possible, because it wants to be the one doing the distracting with advertisements of all shapes and sizes, from text ads in search, to display ads on the network, to video ads on youTube and everything else under the sun. How do you provide web users the easiest route to the web? Well build your own free multi-lane uber-autobahns with Android and now Chrome OS. The two pillars of the web of the future and Google will have troops at each one, mobile and home computing.

The more time users spend on the web, and the more tasks they begin shifting to the web, the better for Google and the more opportunities Google gets to serve up ads from its vast and numerically superior stable of advertisers. This is why Google is free, in its eyes Life should be subsidized by advertising, and advertising of the future will all become Internet based and completely traceable because it gives the advertiser complete metrics and Return-On-Investment calculations to the tiniest detail that are unmatched in any other ad-based marketplace. And as Televisions and Radios become Internet enabled in the future, bet Google will be right there with the expertise to build out a similar type of ad network. Google is more than willing to subsidize its own development costs if its able to produce a pathway to a Google-centric web that others wouldn't or couldn't replicate.

As encompassing as technology and the web already are in everyday life, we've yet to scratch even the earliest of limits, with every piece of new technology becoming web-enabled the inter-connections between people and their technology becomes further encompassing, with the cloud becoming a centralized hub forcing information separation to consist only of virtual borders. A prospect not completely sold to business just yet, but the power of the crowd, and the cost-effectiveness of the cloud will break down those barriers. How will all this happen, and who will pay for it? As Mark Cuban recently wrote about the prospects of free business, the biggest problem is the continued expectation of free and the inability of the biggest pushers of free-service to keep costs in check and monetization opportunities plentiful. That thesis is very much on the mark, no pun intended, by how it related to business, but what it misses, is the relationship of consumers as the end-goal for the real buyers of free: The advertisers.

The Internet, being the disruptive technological platform that it is, essentially drives costs of everything to near zero. This is due to the simple phenomenon that if everyone is connected to everything, there's always someone who'll do something for cheaper, until the cost of that something is driven close enough to zero to become minuscule. And the ones paying the bills at that point will rely on advertising for profitability, and the advertisers will rely on their ads working to then sell products and services and in turn pay their own bills. Google just happens to be the biggest entity making use of the free economy that is the Internet, using all of its advertisers to pay for its storage, bandwidth and corporate costs.

Advertising is funding an over-indulgence in all things web, but subsidizing life, that seems like a stretch right? Currently yes, but as the computer and the Internet is engulfed by all of the younger generations for communications, commerce, entertainment, social networking, dating & relationships and more, it will start to look startlingly close to the major components of life.

Imagine if the brick & mortar world worked this way? Say there was a Google that would pay for everyone's gasoline, provided they had a billion lane road to a super-shopping center, and drove a car they purchased but had customized by Google to point out interesting things along the road and showcase the occasional billboard tailored to an individual's needs and previous purchases. How many would turn that down? And after sometime of that model working, I'd say the brick & mortar Google would even be willing to take you to the lot and pay for the vehicle, guaranteeing it would always work perfectly on those roads to the mall. All subsidized of course by your friendly neighbourhood Spidermen, umm, I mean Mad Men.

Disclosure: Author owns GOOG, AAPL

Apple cuts Mac prices, unveils Software and new iPhone at WWDC

The yearly developer showcase that is Apple's (AAPL) Worldwide Developer Conference (WWDC) kicked off with a keynote, once again sans-Jobs, but was packed with several software and hardware announcements.

Consider Palm's (PALM) highly touted Pre smart phone sold well in its first weekend the landscape for telecom mind share had shifted away from Apple for at least a short while. Analysts early estimates point to sales of about 50,000 Pre devices in the first weekend for Palm, which compares to about 270,000 devices when the original iPhone went on sale and 1,000,000 units for the iPhone 3G. While it may be unfair to compare launches since Sprint is a much smaller carrier compared to AT&T, and the iPhone 3G launched in a multitude of countries, its the media that counts. Palm made a good sized dent during the Pre's announcement, sales will have to continue to deliver if it hopes to turn that dent into a crack.

But when Apple takes the stage for any event, competitors in each line of business must be anxcious, hoping to be able to breathe a sigh of relief as the rumors come and go with little to no surprises. At today's event, it seems every business Apple is in, it made headaches for its competitors.

The Computer Hardware business: Apple reduced pricing on virtually all of its machines, turning the well designed aluminum laptops into a family of MacBook Pro machines starting at $1199 for the 13 inch computer formally known as simply a MacBook. The slim MacBook Air also got a price cut and Apple kept the $999 price point on the previous generation white plastic MacBook. The only model in the line to keep only the MacBook name.

The Computer Software business: Mac OS X Snow Leopard, branded and versioned like a full OS upgrade, was priced like a going out of business sale. $29 for the next version of Apple's Operating System due in September, has got to make the folks at Microsoft (MSFT), who are rolling out Windows 7 a month later, a little bit edgy.

The Phone business: Apple, having repeatedly said, didn't want to leave a price umbrella for competitors has finally publicly brandished an iPhone on the world for $99. While unveiling a 'newer, better, faster, stronger' iPhone 3GS, sounds like a Porsche doesn't it, the company kept its $199/$299 pricing for the new models, setting the existing iPhone at the magic 99 figure. This puts tremendous pressure on the makers of Blackberries, and Androids, and especially the Pre, which is $199 after a $100 rebate.

Many hoped, Steve Jobs would make at least a minor show-stopping appearance, the rumor mill still has Apple's iconic CEO returning to work at the end of the month, which will put several analysts and many potential investors at ease. Apple's year-to-date run up of 69% has showed that Investors feel the company can survive without Steve or they are already sure he will return. However, the company still stands $60/share away from those gaudy 2007 highs, with a business models that combined are selling more devices than ever.

Disclosure: Author is long AAPL

Console Makers battle for fans taking over Gaming Expo

Video Games and Movies, the two business channels that were least hit by floundering worldwide economics. Box Office receipts and attendance are at or near records and the growth of gaming, while pausing slightly, still stands out as a tech sector on the rise. With gaming options like Nintendo's (NTDOY) Wii & DS, Apple's (AAPL) iPod Touch & iPhone, Microsoft's (MSFT) XBox and Sony's (SNE) Playstation 3 & PSP the kids (and ever increasing adults) these days have choices aplenty.

The Electronic Entertainment Expo goes on as we speak and it has been an interesting couple of days with keynote speeches by the big 3 console makers; Microsoft, Nintendo & Sony. While its been common knowledge that Nintendo and its motion controlled & causal gamer placed Wii has been the big winner in this generation of the console wars, with NDP data showing it outselling the XBox by 2:1 and the PS3 by a factor of 2.5:1 lately, the true test is likely to be longevity.

It's no surprise that laggards Microsoft and Sony had to deliver something to excite fans and developers in order to gain traction against Nintendo. It was the folks from Redmond up first yesterday with a keynote speech that excited not only the XBox faithful but fence-sitters alike.
Not only was the XBox opened up for several applications including social networks Twitter and Facebook and music streaming service Last.fm, it also introduced several enticing games and a entirely new control system.

It was the control system that garnered the heaviest reaction. "Project Natal", as it was coined, gives players a way to become the controller for their games. A camera system with facial and voice recognition follows a player's movements and can translate them onscreen for gaming interactions. The Microsoft team showed off several demos, straight out of Minority Report, of the "still-in-development" technology but it was very promising and it goes completely the other way from Nintendo's popular Wii motion controls. A development high-point for Microsoft in the gaming world? Or would Sony steal some thunder with their own announcements just a day later?

Sony's day had arrived and the company had several announcements to make, first a foremost another handheld system, dubbed the PSP Go. Sony will continue selling its existing PSP which has slowly but surely been selling very well for the company (although not as well as Nintendo's DS line or Apple's iPod Touch). With this new version Sony is going to full digital distribution for games and media making it a direct competitor to the aforementioned iPod. With 16GB of storage it undercuts the iPod's price by $50 ($249 vs $299).

Not to be outdone, Sony also jumped into the Motion Control business with a new controller. Internet outlets were quick to praise Sony's efforts as the motion control (based on a similar technology as Hollywood CGI & Motion Capture) allow the player to use the controller for a vast spectrum of game situations with incredible control accuracy. One of the demos showed off how to "air-write" with the controller, with incredibly precise results. The difference between Sony's and Microsoft's new controller entries is that in Microsoft's case the player actually need a controller to play.

Along with an army of popular game developers, both Sony and Microsoft made their case to the video game community that they are not only in the business to try and win and despite Nintendo's early lead, but also want to allow this generation of console hardware to still go strong. If today's announcement are any indiciation there's plenty of innovation left in the space. But what does E3 have to do with Investing?

Sony, despite its size is a vast gaming operation, and with the company posting its first yearly loss, it needs the Gaming operation to deliver incredible results in the years going forward. This will not happen without 1) Exciting innovations in the hardware (and lower costs) and 2) Developers excited about making games for that hardware. Sony has been in 3rd place in console sales since the PS3 launch but it has a long lifetime committed to the platform and even still sells a lot of PS2 machines. The bet on Blu-Ray as a standard will be debated for a long time as to whether it helped or hurt the PS3 in its early years, but the fact remains that Sony still loses money on each sale. The one thing consumers are clamoring for they still haven't received with the machine and that's a deeper price cut! Until it can cut those costs, Sony may simply have to suffer through more months at number 3 on the sales charts.

But with an upcoming stable of games, the new PSP Go and an impressive Motion Controller demo Sony is hitting the right track with Gamers and Developers, and Sony's stock followed suit with a gain of over 2% to close at $28/share.

Microsoft on the other hand, prints money from Windows and Office and doesn't really need a Gaming division, or does it? It in fact needs the XBox to succeed now more than ever for one simple reason. Image! Microsoft has a huge image problem amongst the computer using youth, with a floundering Windows Mobile team being eclipsed by Apple's iPhone, the disaster that was Windows Vista opening the door to more mainstream Mac usage, and the ignorance of anything related to Search the company can come up with due to Google's dominance in the area. This "Old-man's" Microsoft, being out-innovated by hipster companies will eventually trickle down to its core businesses.

The devices group may be that saving grace, while the Zune hadn't exactly lit anything on fire, the original XBox was a good start that has picked up steam with the XBox 360. The innovations of Project Natal, specifically the player controller, are the kinds of things the computer buying youth can get excited about, and once you've got them, if Microsoft can link the XBox brand with the Microsoft corporate image, a Windows user may come back or emerge. Microsoft stock was up about 2% on the day of its E3 speech and sits at $21.40/share.

While Video Games may have been child's play in the past, this business is as important as ever and some of the biggest tech names on the planet rely on a little old conference to reshape an entire corporate vision. Maybe its time to put a little stock into what things like E3 and those who attend have to say.

Disclosure: Author owns AAPL, holds no position in any stock mentioned.

Consumer Confidence outweighs Housing Prices as Markets Rally

US Markets found themselves on the buy side up between 2 and 3% at the last hour of trading as stronger consumer confidence data triggered a surge of bids in morning trade. The Consumer Board's confidence index rose to 54.9 in May from a 40.8 reading in April and this jump was enough to get investors to shrug off another rather negative housing data point.

An S&P Index of Housing prices reported a decline of 19%, details at CNBC (Link), which was the steepest drop in the reading's history. Foreclosures, economic woes, and increasing supply dampen prices all are contributing factors to the decline, however, as these prices bottom, investors clearly see a bottom forming with the terms "housing affordability" and the like being tossed around.

The increase in consumer confidence was a heavily watched metric that started the market's rally in the early hour. The forecast for confidence was pegged at around 42 and May's reported 54.9 mark handily trumped that, leading to a flurry of buying activity.

As for other market news, Technology was a main driver, primarily led by an upgrade of Apple (AAPL) shares. One of Apple's skeptical analysts, Katy Huberty has finally changed tunes, with an upgrade and a substantial price target raise from $105 to $180. The Morgan Stanley analyst has had an appalling record of late predicting Apple's quarterly results, at one point being rated the "worst" in terms of estimate accuracy in research amongst 8 top Apple analysts, which is why her bearish tone had attracted far more skepticism than that of RBC Capital Market's analyst Mike Abramsky (He too however recently changed his tone as fears of Steve Jobs' sabbatical lasting indefinitely have subsided for the time being).

The reason for the change of heart, that ever popular iPhone, which by all rumour accounts is due for an upgrade during the WWDC event the company will host in early June. While speculation runs rampent about just what features will be included in new iPhones the sheer numbers just dont lie. Over 30Million iPhone/iPod Touch buyers downloading 1Billion applications creating a massive, and massively sticky, software distribution and upgrade cycle.

Apple shares have double the Nasdaq advance rising over 6% in late trading.

Disclosure: Author is long AAPL