It wasn't easy to watch Apple (NASDAQ:AAPL) obliterate Wall Street profit expectations yet again, only to see its stock drop on the news this week. Yes, the company did provide a pretty lame outlook for the current quarter, but it was more than offset by the monster holiday period profitability.
Poor Apple. And now folks are starting to wonder if the iPhone will be too expensive. Is $500 a lot to pay for a phone? Plenty of people seem to think so. Microsoft (NASDAQ:MSFT) CEO Steve Ballmer even claimed as such on CNBC, and you had third-party reports claiming that Apple stands to make fat margins on the gadget.
There's one thing that I don't get, though. Cell phones themselves aren't exactly cheap. The reason why $500 seems so ludicrous is because we're used to paying pocket change for wireless handsets because of the steep discounts tied to cell phone service contracts.
For now, Apple has an exclusive deal with AT&T's (NYSE:T) Cingular. If you go to Cingular's site, you will see that no one is paying retail for a phone as long as they are signed up for a Cingular plan. Between the $99 online discounts and the $100 to $150 price breaks for two-year contract commitments, you can get a $250 Nokia (NYSE:NOK) phone for free.
AT&T is no dummy. It knows that demand will initially run high. However, it will be hard not to discount the iPhone as an incentive to get consumers to sign up for long wireless service deals. Is $250 to $300 still so outrageous?
Like any new device, it's going to have its share of bugs and critics. I just think it's ludicrous to think that the iPhone isn't going to be the smash hit of 2007.
Going on a FOX hunt
News Corp. (NYSE:NWS) knew that it was getting a teen magnet when it acquired MySpace. Apparently it's attracting a great deal of litigation, too. A lawsuit was initiated in California by the parents of four underage girls who were sexually assaulted after hooking up with older gents on the popular social networking site.
The seedy underbelly of MySpace has some wondering if the site's days at the top are numbered. Even when MySpace tries to curb the unadulterated ribaldry that often invades the site, it is usually not enough. The company is now rolling out a software application that allows parents to monitor the status of their kids on the site.
It's weak, though. All it does is alert you if your child tries to alter his or her profile to pretend to be someone older. Sure, if MySpace were to ever let parents sneak a peek at actual profile contents and user messages, loyalty would be toast with its youngest of users. The tumbleweed would blow on by. However, this is a situation that is going to get even uglier. Good luck rounding up top-paying advertisers in this sea of negative publicity, News Corp. It won't be easy.
Until next week, I remain,
Rick Munarriz
Microsoft is an Inside Value recommendation. AT&T is a former Stock Advisor recommendation.
Longtime Fool contributor Rick Munarriz recommends windshield wiper fluid when trying to look back. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
