As far as bullish price targets on Apple (Nasdaq: AAPL) go, it's hard to beat Jefferies & Co. analyst Peter Misek's recent bump to $450. Barclays Capital analyst Ben Reitzes checking in this week with a new $420 price point may not seem all that newsworthy in retrospect, but he raises an interesting catalyst.
Apple's move to add Verizon (NYSE: VZ) as an iPhone -- and eventually iPad -- wireless carrier is going to be a major boost for FaceTime.
Reitzes sees 200 million devices running Apple's iOS by the end of fiscal 2012, 50 million more than he was targeting just three months ago. Verizon's arrival is a major reason for the uptick, but Apple's improving state elsewhere clearly has to be factoring into the blossoming figure.
Obviously 200 million is a big number, but let's take things down a notch.
About face
As far as applications go, FaceTime has been more hype than substance. It was cool enough to demo during the iPhone 4 launch and for a neat ad or two, but it's hard to find folks that are heavy users of FaceTime. It's a clever novelty, but it's failed to gain traction for the same reason that Reitzes is pumped about its potential in the future.
There may be 200 million iOS devices out in the wild in less than two years, but FaceTime isn't available on most of the current gadgetry running the operating system. It is presently limited to Apple's iPhone 4 and the latest generation of its iPod touch with Wi-Fi connectivity.
We're not just talking about Apple flipping an update switch to get the iPads and earlier iPhones and iPod touch players in on the video chatting. All of those devices lack the dual-facing cameras required to make FaceTime sing. Today's iPad and pre-2010 iPod touch portable media players don't even have a camera. The iPhone 2G, 3G, and 3GS have only forward-facing cameras, so there's no face-to-face communication to be had.
In short, there's a lot riding on the only two horses in Apple's iOS fleet that can clear the FaceTime hurdle. The iPhone 4's a hit, but iPod sales have stalled.
This will change. When Apple refreshes its iPad line in the coming months it's a lock to have front- and rear-facing cameras. On the iPhone front, Apple historically updates its smartphone beast every June. AT&T (NYSE: T) and Verizon sell their subsidized phones with two-year contracts, with a little wiggle room to upgrade even earlier. The end result is that by the end of fiscal 2012, AT&T and Verizon will be selling the third generation of dual-camera iPhones. There will still be some older iPhones out there. It's a harder sell on the iPod front. However, Reitzes argues that there will be a far greater base of potential FaceTime users out there by September of next year.
He's right.
If you shoot it, they will come
There's nothing sadder than a viral gimmick that doesn't work. Microsoft's (Nasdaq: MSFT) Zune had a spiffy song-sharing feature, but few Zune owners to actually do the track swapping. That's FaceTime right now. Only one of the three iPhones in my family is an iPhone 4, and it's not mine. How many traveling spouses, kids away at college, and long-distance relationships are out there that have incompatible hardware?
There are alternatives to FaceTime, naturally. eBay's (Nasdaq: EBAY) minority-owned Skype leads the way in voice chat platforms with video capabilities. Cisco's (Nasdaq: CSCO) Umi Telepresence and Logitech's (Nasdaq: LOGI) Revue with its $150 TV Cam accessory are pushing consumer video-conferencing into the living room.
None of them are perfect. Web-based video chat is typically PC-based. Cisco and Logitech will soon learn Microsoft's cruel lesson with the Zune when it comes to networking effects in an empty room.
Apple's the one with the best shot to be the market leader in portable video chatting. Wireless carriers are beefing up their networks to deliver the desired speed and consistency. In a few weeks, every new iOS gadget manufactured will be FaceTime capable.
This really can be the mother of all networking effects, especially as owners of older Apple gear upgrade to keep up and those using other tablets, portable media players, and smartphones make the switch so they're not left out in the FaceTime fun.
As big as Apple may seem to be today, it's going to be even bigger in the future.
Have you had any FaceTime experiences? Share your thoughts in the comment box below.
