Apple’s Morning-After iPhone Headache

Apple Inc. is having a bad day after a spectacular evening when it reported a blowout financial performance. Sold more iPods (21 million), and Macs, banked billions in cash and what not. However, like all of us who have had a bottle of wine (or two), they are waking up with a hangover. The outlook for the second quarter of fiscal 2007 isn’t so rosy, and as a result the stock is down almost 4 percent, and still heading south.

I think Apple is experiencing the down side of over-hyping. By announcing iPhone at the Macworld, the company has put purchasing decisions on hold for millions who were in the market for a high-end iPod. There might be little risk to the lower-end iPod Shuffles and Nanos, but the big profit-making high-end iPods might be at risk.

“We believe this [seasonal] risk is particularly pronounced given our concerns that some consumers may delay iPod purchases ahead of the iPhone lauch,” Bill Shope of J.P. Morgan wrote in a research note to his clients.

The iPhone could pose a bigger challenge to not just Apple but to other handset makers as well. A lot of non-geeks, non Mac fan-boys have emailed or called us, gushing about the iPhone and are willing to wait for the device before buying their next device — an Mp3 player or a mobile phone. Could it prove to be a collective “oops” for the tech business as the “Apple Shock” ripples through the entire ecosystem?

It is also interesting to note that Apple did not announce a single product at Macworld that was available instantly and could add some zip to the Apple revenue stream. Apple TV and Apple Airport are not available till next month. Both are expected to do well, but will they be the two “advils” you need to cure the hangover?


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