Apple This Week: iPad Mini Rumors Swirl
With the iPhone 5 having just launched and the release of an iPad Mini seemingly right around the corner, there's no shortage of Apple (NAS: AAPL) storylines. Let's take a look at the top storylines surrounding the company this week.
The iPad Mini is coming!
As we saw before the launch of the iPhone 5, it's getting tough for Apple to keep the level of security it's accustomed to around its product launches. Despite Tim Cook's insistence at last year's All Things D conference that the company was "doubling down" on product secrecy, almost every detail of the iPhone 5 leaked before its unveiling. Likewise, thanks to leaks across Apple's massive supply chain, we're starting to see plenty of news surrounding iPad Mini production.
In fact, the rumor mill around the iPad Mini is so heated, this week we saw reports not about when the iPad Mini would be hitting store shelves, but when invitations to its launch event would be sent to the media! For those curious, the invitations are supposed to be mailed out Oct. 10.
Yet the more intriguing iPad Mini reports this week center on possible yield issues that could lead to product shortages this holiday season. We saw investors dissapointed when Apple sold "only" 5 million iPhone 5s on its launch weekened, a situation more about supply constraints than about demand.
As of right now, the supply issues aren't reported to be a long-term issue, with most iPad Mini supply constraints seen as happening in the tablet's first month on the market. Yields generally improve with production batches as production kinks are worked out. For example, yield rates for the in-cell touchscreen panels that were causing early iPhone 5 shortages appear to be improving.
Yet if the iPad mini is experiencing yield issues, there are a couple of reasons Apple investors should keep an eye on the issue. First, if yield issues do lead to low initial supplies of the iPad Mini, you'll want to dismiss any media hysterics over lower-than-expected sales figures at launch. Second, if manufacturing problems last longer than expected across the holiday quarter, that could be a setback for the iPad Mini. As a product that's more consumer-facing than its larger 9.7-inch iPad cousin, the iPad Mini will find holiday sales to be its sweet spot.
Streaming music, not sustainable?
Its no shocker that streaming music is a difficult business. Pandora (NYS: P) went public last year and has struggled to maintain profitabiliy. Likewise, this week we saw dire numbers from Spotify, a private company that's garned quite a bit of attention for the number of subscribers swarming to its service. PrivCo, a company that researches private company financials, posted Spotify's full-year 2011 financials, and the situation looks ugly. While Spotify is growing revenues by 151%, its losses keep widening.
The central reason for losses is content costs that scale in line with revenues. Last year, 98% of all revenues went straight back to music labels in the form of licensing costs. Pandora suffers from a similar problem where revenues continue soaring but costs move in line. In business terms, the companies lack any sort of operating leverage.
This is all relevant to Apple investors, as the company is currently in discussions to create its own streaming service.
Apple can't win across all areas of software services, as we've seen with its lackluster Maps offering. In music, the company's "Ping" service, centered on sharing and recommendations was a dud and recently shut down. However, with stand-alone competitors like Spotify and Pandora struggling in the streaming space, this looks like a prime opportunity for Apple to expand its "moat" around being the preeminent music platform. That won't have a direct effect on the bottom line through any music services, but it'll present just one more reason users are lax to switch off Apple devices.
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The article Apple This Week: iPad Mini Rumors Swirl originally appeared on Fool.com.Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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