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Technology Stock Roundup: Of AAPL iPhones and MSFT Music

Sejuti Banerjea

Last week, Apple (AAPL) launched its new iPhones, while Microsoft (MSFT) took its Xbox Music to rival devices.

Apple Doesn’t Need a New iPhone

The long-awaited new iPhones launched last week, sending Apple shares crashing. This is not the first time that an iPhone launch negatively impacted share prices. In fact, as Dan Gallagher of marketwatch.com pointed out, share prices have declined after the announcement in three of the preceding five years. But let’s see what’s different this time round.

First, the smartphone market in developed countries is getting saturated and Apple is having a hard time attracting new buyers. Second, the iPhone is a premium product in a difficult economic backdrop with many competing products and it will get increasingly difficult to get carriers to subsidize. Third, Apple’s marketing efforts leave a lot to be desired.

On the other hand, these factors have created the perfect background for underdog branding, a concept that was very effectively used by Avis (CAR) to take its market share from 11% to 35% back in the 1960s. Avis used the slogan “We’re number two, so we try harder.” Today, “Avis” is a premium brand, and the company’s value services are sold under the “Budget” brand.

The problem with Apple is it is pulling down its own brand. Today, first-time smartphone users have many options and Apple needs to tell them very loudly “Why Apple - Why iPhone?” Instead it is saying “We also do plastics.” It’s true that a phone is a commodity item and price erosion and progressively stiffer competition should be expected. But it’s also true that you can’t succeed by apologizing for who you are, or worse, if you increasingly don’t know who you are any more.

Microsoft Will Share Its Music

Microsoft has announced that Xbox Music is now available across operating systems, devices and through free streaming on the Web. First launched roughly a year ago, Xbox Music is an all-in-one service, combining subscription streaming Spotify-style, Web radio Pandora (P)-style and individual track purchases iTunes-style. The new Xbox Music apps that make the expansion possible are now available for download from the Apple App Store and Google (GOOG) Play Store.

The app allows saving of favorites and playlists across devices and will soon be able to create custom playlists, artist-based radio stations, offline listening and download-to-own. Additionally, Xbox One users will for the first time be able to listen to music while playing games.

The expansion is a big deal for the music service, since Microsoft has less than a 4% share of the mobile device market, which is where all the action is. With the expansion, Xbox Music gets an entry into the rest of the market. Music consumption patterns have changed radically over the last few years and Microsoft’s service is now catching up.

Whether it catches on or not is a different story and its devices strategy will likely play an important role. We already have the Google ecosystem and the Apple ecosystem and it’s good to see Microsoft taking action to create the Microsoft ecosystem. There’s a humongous amount of work to be done, of course, but the fact that Microsoft is showing some direction is encouraging.

Intel Everywhere

At the Intel Developers Conference (:IDF) held last week, Intel (INTC) displayed yet again how it remains the technology leader. It said that 22nm chips were already shipping and 14nm would ship by year-end. It also remains on track for further shrinks over the next few years (in keeping with the tick-tock strategy).

The resultant decline in costs means better margins for Intel, while the increased computing power and energy efficiency means better functionality for customers. Intel is now getting inside not just PCs, notebooks and ultrabooks, but also tablets and chromebooks. It is working closely with both Google and Microsoft and this year will see a huge volume and variety of Intel-powered devices run by competing operating systems. In short, Intel plans to be everywhere.

On that note, the company president Renee James described the evolution of computing through three stages – task-based, lifestyle-based and integrated computing. As the names suggest, Intel was the leader in the task-based or desktop computing phase and successfully defended its market for years. It was so successful in fact that it was almost complacent, nearly missing the current phase that is to do with lifestyle (computing where you want it).

But there are indications that this phase will give way to the next, when everything in the world (medical devices, home appliances, industrial automation, wearable computing, etc) will be connected and intelligent. And Intel promises to play a leading role in that evolution.



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