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

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

Tuesday brings in Valuation Hunters, Stocks Rise 10%

The headlines were set to spook once again: "Consumer Confidence at all-time low" (CNN). "Home prices see record plunge" (Reuters). But the bargain and valuation hunters were out and about nonetheless. When Stocks get this cheap the big-time and small-time Investors stand up and take notice.

Aluminum maker Alcoa (AA) fell to its lowest P/E ratio ever-recorded and today observed value-investors jump in cautiously in early-morning trade but emphatically as the day moved forward. Alcoa gained almost 18% on the day as both the Dow and S&P gained a full 10 percentage points.

In other good news, Boeing (BA) Investors took a deep sigh of relief as the company struck a tentative deal with its Machinist workers. A strike that, at the worst possible time, plagued the company for weeks on top of economic-driven market sell-offs. Boeing shares recovered 15% on the day.

Wireless Carriers in North America had a particularly positive rebound trading session. Verizon (VZ), up 15%, jumped for the second straight session and AT&T (T), up 13%, followed closely as Investors are taking heed of Wireless growth prospects despite economic woes. Devices like Apple's (AAPL) iPhone and RIM's (RIM) Blackberry Bold and Storm models are creating value-propositions that customers are willing to engage in. As Apple announced their quarterly results last week, headlined by almost 7Million unit sales of iPhone 3G, Carriers around the world are now beginning to see a customer set willing to spend more on combined Voice and Data plans.

In Canada, Rogers Communications (RCI.B) announced its quarterly results, which of course were headlined by iPhone sales of over 250,000 units. The battered Canadian Wireless company stock rebounded 11% on the day.

Investors, analysts and the media in particular, like to beat the doom and gloom drum on bad days and the euphoric relief drum on good days, but for those observing and waiting on the sidelines it is easy to get caught into the hype. Companies still trade on fundamentals and valuations, and while attractive valuations are observed all over the market these days I'd be much more comfortable seeing sustained positive moves over a number of days, rather than a valuation-based up day that now prices in complete expectations of a further half-point Federal Reserve Interest Rate cut.

This market will need some more positive reinforcement, so until then, as great as it feels to be euphoric about stocks again, the euphoria will have to wait for now.

Disclosure: Author owns AAPL, T, RCI.B, BA

Excitement begins to spread around the globe for Apple's 3G iPhone.

With customers in New Zealand, Australia and Japan being the first in the world to officially get their hands on Apple's (AAPL) anticipated 3G iPhone, the euphoria across the Internet is reaching another fever pitch. Customers waiting in the US and Europe for Friday morning launches of the device are patiently prying into Apple's worldwide websites to get a glimpse of the updated software for the device and to get a sneak peek of the heralded application store.

Even though the updated version of Apple's trendy and hot-selling iPhone contains faster mobile network browsing and GPS, the biggest business opportunity here will indeed be the development of applications for the iPhone platform. The "AppStore" as Apple calls it is the one stop shop for iPhone and iPod Touch users to download, or pay for, additional applications for their updated devices.

While time zone differences allowed Oceania to get their iPhone 3G's first, the US and Europe will have the biggest say in terms of the devices success. So far, it's looking very good! Telefonica, one of Apple's carrier partners in Europe announced that it has taken over 300,000 pre-orders in the U.K. and Spain. It could certainly be said that this represents a much better turn-out than the initial Edge-only iPhone was able to muster when it went on sale in Europe late last year. The updated device hits the shores of 22 Countries either today or tomorrow and if the North American launch follows the initial European interest it promises to be yet another iPhone-mania weekend for the not-so-little-anymore company out of Cupertino.

Apple still has a goal of selling 10Million units by the end of the year, and considering the company is officially still well short, the 3G iPhone will need to make up those numbers in a hurry. Apple's confident in reaching their targets, analysts are confident Apple will obliterate them with new subsidized pricing, and as such shareholders should be confident that even in turbulent markets the profit factory that Apple has of late become will continue to churn, and churn loudly!

While it sells unit after unit of this new generation iPhone, the company decision to open up the platform to developers was a terrific one. The subsequent SDK and new AppStore will provide Apple with close to as much recurring revenue on each unit as they were getting in the carrier subsidies for the first generation device. Add to this Apple's MobileMe platform for iPhone users which will wirelessly sync e-mail, calendars and contacts for personal users, an "Exchange for the rest of us" as they've called it, and you've got the makings of a potentially huge wirelessly connected user-base. While MobileMe is separate from the AppStore, it does play a role in the extended services new and existing Apple customers will buy.

Applications for sale and download from the store range from Free all the way to $69.99, however a vast majority fall within the $9.99 and lower price point, including several popular games. The previously showed off Super Monkey Ball game for the iPhone is $9.99 and it already has been downloaded almost 4,000 times. And the AppStore isn't even official yet in 90% of the world.

Some quick math. 4000 downloads x $10 = $40,000
Which gives $28,000 back to the developer (a 70% cut) and $12,000 to Apple (a 30% cut).

A brief glance through the AppStore reveals over 550 Applications with surely more on the way every day/week/month. At this rate, developers should soon be enjoying the same digital distribution successes that the music and movie businesses are seeing sooner rather than much later. iTunes has truly become the one place for all things digital, and at the backbone of the entire ecosystem is Apple.

The company virtually sold ZERO iPhones in the month/2 months prior to this launch, but it appears from initial indications that they will handily make it up now through 3G device volume. With an earnings report on the horizon, the Computer and iPod business will be center stage but in the remaining 5 months of the year iPhone and the AppStore will once again be squarely on the minds of analysts, management, and in turn shareholders. Expect another stellar quarter from Apple for June (as an analyst has pegged Mac sales at 2.5Million units), and as the worldwide iPhone roll-out continues to 70 Countries and beyond in the remainder of the year, the sales figures for the device will continue to climb.

And if they ever get that deal with China Mobile worked out and unleash the iPhone to 600Million more subscribers, watch out!

Disclosure: Author owns AAPL