The Apple Investor - February 18, 2010: Apple Will Crush Amazon In eBooks, Says Credit Suisse

Apple Is Going To Crush Amazon In E-Books And Fast, Says Credit Suisse (Yahoo Finance)
In a note out yesterday, Credit Suisse analyst Spencer Wang says he suspects that “Apple, Amazon, and Google eventually split the market. Therefore, we expect Amazon’s share of eBooks business to fall from 90 per cent currently to about 35 per cent over the next five years.” That’s a rough tumble. And if he’s right, it’s great news for Apple. That said, Wang also estimates that Amazon’s e-book sales will increase more than 3x by 2015, so really it’s good news for everyone.

Apple’s Tricky eBook Contract Provisions Means That It Might Not Save The Publishing Industry After All (New York Times)
Apple jumped into the ebook war recently with the announcement of the iPad and an “agency” pricing model that promised publishers a higher price point ($13-$15) than that of Amazon’s Kindle ($9.99). But Apple is keeping its options open. Specifically, Apple inserted provisions requiring publishers to discount e-book prices on best sellers. Once a book is published, it can be sold at the higher price point, but if it makes it to the best seller list, the price automatically drops. This is good for consumers, Amazon, and Apple (which will be price-competitive and sell more ebooks). It’s bad for book publishers, but also inevitable.  Ultimately, publishers are deluding themselves if they think Apple is their friend here.  If they want a glimpse of their future, they should look at what Apple has done to the music industry.

Copycats Line Up To Introduce iPad Competitors (Knock Offs) (The Wall Street Journal)
As suspected, lemming computer makers around the world are now hopping on the tablet PC bandwagon hoping to capitalise on the flurry of interest Apple has spawned with the iPad. HP, Dell, Acer, Sony and Microsoft are all watching the innovation leader and learning from its mistakes as they ready their own internal teams. As PC profit margins dwindle with continued pricing wars, many are praying that the new gadget will set higher price points (which it won’t–because Apple has priced it competitively). While Apple won’t likely have as big a competitive advantage as it did with the iPhone, everyone else will likely be playing catch-up for years.

Apple’s Control-Freak Secrecy Triggers Another Round Of Bad Press As Chinese Goons Beat Up A Snooping Reuters Reporter (Reuters)
The pressure to keep secrets while working for Apple’s supply chain partners in China is so intense that one worker killed himself last year, reportedly over a missing iPhone prototype. More recently, a Reuters reporter was assaulted by security guards on a road outside a factory in China, just for taking photos. Now, Apple probably doesn’t have direct control over security practices at these factories, but it is being blamed for the assault.  The company needs to rethink the lengths it is willing to go to to keep future product news secret.

The War Between Adobe And Apple Continues As Apple Disses Adobe’s DRM For iPad (Los Angeles Times)
In another step to completely control its marketplace, Apple will not employ Adobe Systems Inc.’s e-book digital rights management (DRM) technology. The company will use its own system, FairPlay, effectively locking consumers into Apple’s ecosystem. Apple’s other fight with Adobe is over security issues with Flash, which continues to annoy iPhone and iPod users.  This standoff seems likely to continue for a while, but it can’t last forever.  Apple’s customers won’t stand for it.

Apple’s Failure To Allow Multitasking On iPhone And iPad Limits Corporate Sales Opportunity  (Apple Insider)
 One of the most frustrating flaws of the iPhone and iPad is the lack of ability to run multiple applications at once. Apple is working on various ways around this issue (which is more of a security concern) and the final iPad release will no doubt introduce new features that were not included in the original presentation. Until Apple resolves this issue, however, this constraint will limit corporate use of the device (and, thus, the size of Apple’s market opportunity).

Open Interest In Feb Options Should Add Liquidity To AAPL (Chicago Board Options Exchange)
Open interest in at-the-money February options may impact Apple stock on Friday. Expiration-related trades could cause trading activity to pick up as Apple has 75K open interest contracts outstanding. While it’s impossible to know if funds are net long or short, flow should create added liquidity.  So if you’re looking to buy or sell huge blocks, Friday may be your chance.

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