Can't beat an iPod that makes phone calls

Strategy Lab is MSN Money's stock-picking challenge. To learn more about the game -- and the contenders -- click here.

ChangeWave Investor Tobin Smith came out this week with a new Strategy Lab journal declaring "I'm here to tell you why Apple (AAPL, news, msgs) is headed to $225."

In my recent journal on Apple, I took a look at whether Apple, which has doubled over the last year, has the potential to double again. To me, in the end, it came down to this question: Is the iPhone a cell phone that is also an iPod, or is it an iPod that is also a cell phone?

There are many smart, competitive cell phones, but the iPod is, hands down, the dominant music player.

Well, you can tell a lot more about what people are thinking by observing what they do, rather than listening to what they say.

The phone companies clearly don't think the iPhone should be compared with other smart phones. They have done deals with Apple that they would not have done with any other smart phone manufacturer.

Neither do the buyers. They are passing on the Motorola, Nokia and Palm smart phones, even though they are, because of wireless-carrier subsidies, much cheaper -- and sometimes even free.

Conclusion: The answer to the question I posed in the last article is that the iPhone is more properly thought of as an iPod that just happens to make calls. (To see your answers, visit my blog page.)

Unlimited potential

When you think of it as a member of the iPod family, it changes your perspective about what the iPhone could do for Apple. And with the announcement Wednesday that Apple plans to start allowing third-party iPhone applications to be built and installed, a whole new level of flexibility has opened up for users.

Jeff Kalnitz, blogging as one of our Strategy Lab Open competitors, recently wrote about how valuable he has found the iPhone so far, saying "After using my iPhone for several months now and experiencing the reactions of others to my using it -- I think the implications of what Apple is doing here go way beyond the current crunching of data analysis, in order to comprehend just how revolutionary and disruptive this company's forays will be to early 21st century communications."

Later in the post he writes, "In the meantime, you will see more iPhones popping up in consumers' hands and pockets in an escalating sliding scale of consumer purchases, and the numbers will impress, not only in the U.S., but increasingly around the world. And they will improve with every version, selling in larger and larger numbers. They get fashionable, they get sexy and consumers won't be able to resist splurging.

"And there is a good chance that business-oriented people the world over will increasingly snap up the next few versions of the iPhone, which will continue sporting more and more essential new features necessary to the business class of buyers. "

Let's not forget about the new iPod Touch, which is essentially an iPhone without the cell phone component.

Continued: Look, ma, no wires

 1 | 2 | next >