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With Steve Jobs' much-anticipated unveiling of the iPhone at the MacWorld Conference in San Francisco, it's safe to conclude that no technology company better understands the consumer market than Apple (AAPL, news, msgs).
Reflecting the company's success with the iPod and sharp focus on multimedia products, Jobs said it would drop the word "computer" from its name to be known simply as Apple Inc.
With the iPhone, Apple takes the "smart phone" to a new level. The device will have the usual e-mailing, Web browsing and search functionality associated with current products from Research in Motion (RIMM, news, msgs), Palm (PALM, news, msgs) and Motorola (MOT, news, msgs). But it also will synchronize a user's music, video and photos from Apple's iTunes. The superthin, supercool-looking phone (there are no external buttons) will also support mapping functionality from Google (GOOG, news, msgs) so users can easily locate restaurants, theaters and other services.
Business users aren't likely to buy the iPhone, so the BlackBerry and Treo aren't threatened too much, but consumer options from Motorola and Nokia (NOK, news, msgs) are in trouble.
Poised for another blockbuster
At $499 for a version with four gigabytes of storage and $599 for an eight-gigabyte version, the iPhone isn't cheap. Yet with an army of iPod users eagerly awaiting the new product, there should be brisk sales: Apple expects to sell 10 million by the end of 2008. If its success is like the iPod, those estimates will be on the low side.The iPhone isn't just about selling another hardware device in mass quantities, though Apple needed another sexy product offering and now has one. The real promise of the iPhone, and why Wall Street is so jazzed, is that it's a significant step toward turning the concept of seamless mobility into reality. Apple has created a true mobile Web device.
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To boost the product, Apple said it will offer movies from Viacom's (VIA, news, msgs) Paramount Pictures. For now, Paramount will offer only its backdated titles, not new releases. Still, it's a sign that Apple will succeed in building off its Disney library and in time will offer a full slate of movies. If you can download a movie for $10 to $12 and play it over your TV, why buy a DVD from a store any more than a compact disc for music?
Making real money, really fast
The Apple TV launches next month and will sell for $299. Though it will likely take time to catch on, it proves yet again the company's innovation. Note that Apple also announced that consumers have downloaded more than 2 billion songs from iTunes and that it sells 5 million songs a day. Let's see, at 99 cents per song, that adds up to real money, really fast.Jobs has a history of wowing investors and consumers during his keynote addresses, and today was no different. This underscores how valuable he is to Apple and why the options scandal that surrounded him and still surrounds the company remains so serious. Jobs is responsible for the company's transformation from a floundering computer maker to a flourishing consumer-electronics giant. It would be a huge setback for Apple if he were forced to leave due to the scandal.
Fortunately, it looks as though Jobs' job is safe, and as such it's safe for investors to once again climb aboard Apple's stock. Valuations aren't cheap. But given the company's record of creating revolutionary technology that consumers can't get enough of -- not to mention creating tremendous shareholder value -- the premium price is worth paying. Look for Apple to make a run at the $120 to $130 level over the next six to 12 months.
With today's close, I'll add the stock to my tracking portfolio in MSN Money's Expert Picks section.
At the time of publication, Robert Walberg did not own or control shares of any company mentioned in this article.
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