Apple Prepares to Bite Back

Yesterday, I wrote about how everyone and their neighbor seems to be gunning for a slice of Apple's (Nasdaq: AAPL  ) iPod and iTunes business. And while I still believe it's possible for News Corp.'s (NYSE: NWS  ) MySpace, Microsoft (Nasdaq: MSFT  ) , and Sony (NYSE: SNE  ) to erode some of Apple's market share for downloadable music, I don't expect the company to passively stand by as revenues drop.

Employing the old football cliche strategy about "the best defense being a good offense," the company is likely to search for new revenues in the cell-phone business.

AppleInsider, a website dedicated to all things Apple, is reporting that the Cupertino-based company is preparing to unveil a new smart phone "that has moved from concept to prototype and recently has progressed to near completion as a production unit."

If this is true (and I believe it is), it could be bad news for leading cell-phone manufacturers like Nokia (NYSE: NOK  ) and Motorola (NYSE: MOT  ) . Not only will Apple's phone have the "form factor" to rival the hipness of Motorola's Razr phone, the company also has a formidable base of 58 million iPod users to market the product to, as well as 155 Apple stores from which to reach out to an even larger potential audience.

The cell-phone market is a $134 billion industry, and if Apple can sell 10 million units at an average price of $200, it could rake in a cool $2 billion in additional revenues.

From my perspective, 10 million units is a pretty conservative figure; if the new phone is anywhere near as well-designed as the iPod, it should do much, much better.

The company is preparing to host a big "Showtime" event next Tuesday, September 12, in San Francisco. Look for it to release a new version of the iPod nano, a 23-inch iMac, and, quite possibly, a new iPod-inspired phone.

If it does, Apple shareholders needn't worry too much about slowing iTunes sales, because the company stands to gain all that money back -- and then some -- by taking a nice big, sweet bite out of the cell-phone industry's deep pocketbook.

Interested in other Apple-related foolishness? Check out these recent articles:

Microsoft is a recommendation of Motley Fool Inside Value. Try out a30-day trial subscriptionto see whether bargain-hunting is right for you.

Fool contributor Jack Uldrich believes that it is a dog-eat-dog world out there, and it helps to have the biggest bite. He owns stock in Microsoft and Motorola. The Fool has a strict disclosure policy.


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