This week some of the major news were related to Apple (NASDAQ:AAPL) after it sent out invitations to reporters to an October 4th event, setting the stage for the widely anticipated launch of iPhone 5. Amazon (NASDAQ:AMZN) also launched its Kindle Fire tablet on Wednesday for a $199 price tag, less than half of the lowest version of iPad version that comes for $499. Research in Motion’s (NASDAQ:RIMM) stock was volatile this week, and the shares jumped earlier in the week on the speculation that activist investor Carl Icahn has taken a stake in RIM. [1] However, the shares declined in the later part of the week, as investors felt that PlayBook tablet will struggle even more after Amazon launched the cheaper tablet.
Here are some of the key updates from last week on these names
Apple
Apple is going to unveil the new model of iPhone 16 months after the iPhone 4 debuted, and hence there is a huge pent-up demand for it. However, we believe Apple will have to come up with attractive features for iPhone 5 if it wants to have the same impact and draw as iPhone 4. The new features will also help it overcome increasing competitive pressures from the Google (NASDAQ:GOOG) camp, which has gained a significant presence in the smartphone market through its Android operating system.
According to a recent survey done by Nielsen, 43% of all U.S. smartphone owners have a Google Android phone while 28% of them own an Apple iPhone. [2] This gap is certainly large enough for Apple to start worrying about. The most interesting aspect is that this gap has increased over the last 3 months with 56% of smartphone users picking Android phone over just 28% for Apple.
Some may believe that Kindle Fire’s attractive price point could potentially hurt Apple, but we do not think so. Kindle Fire is a 7-inch tablet, and we believe it poses design difficulties and is not as useful as a 10 inch tablet such as iPad. Moreover, although Amazon can match Apple in terms of access to media content, Kindle Fire lacks certain features present in iPad such as forward- and rear-facing high-resolution cameras, microphone and a connection to a 3G wireless network.
See iPhone 5 Features & Design Need to Wow Users for Large Impact, Apple Needs Boost from iPhone 5 to Fend Off Android Market Share Gains and Amazon’s Kindle Fire is Cheap But No iPad Killer.
RIM
RIM continues to struggle in the smartphone and tablet market due to increasing competitive pressures from Apple and Samsung, and as a result, shareholders are increasingly frustrated with management and expecting major changes. If the speculation around Icahn taking a stake in RIM is true, he could push for a board seat and press the company to consider a sale. However, despite increasing pressure on RIM, we believe shareholders face many difficulties, and it will not be easy for them to achieve the desired result.
PlayBook, which was already struggling, face another daunting task from Amazon as it has undercut PlayBook price. Amazon can afford to charge less because it will make up the difference by selling books, movies and popular television shows through Amazon. PlayBook tablet has a similar design as Kindle Fire, but does not have the similar content that it can sell to cover up the losses on the hardware. Hence, RIM would be forced to cut PlayBook prices to such levels that will make it compromise on already razor thin margins.
See Rumored Icahn Stake in RIM Fuels Takeover, Asset Sale Speculation and Non-iPad Tablets Have Most to Lose from Kindle Fire
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- RIM shares jump on Icahn stake talk, BGC Partners tech analyst Colin Gillis told Reuters, September 27th, 2011 [↩]
- In U.S. Market, New Smartphone Buyers Increasingly Embracing Android, NielsenWire, September 26th, 2011 [↩]
