On Sept. 1, Apple, building on its dominance in the music industry, unveiled new iPod media players, added social-networking features to its iTunes software and introduced a service that lets users rent shows and movies.
The company revamped its Apple TV set-top box to offer high-definition TV-program rentals for 99¢, Chief Executive Steve Jobs said at an event in San Francisco. The $99 device also will deliver first-run movie rentals for $4.99 and work with Netflix's (NFLX) online service.
Apple, the largest technology company by market value, is parlaying its leadership in mobile applications and music sales to push deeper into video content and social networking. To offer the TV rental service, it forged deals with Walt Disney Co.'s (DIS) ABC and News Corp.'s (NWS) Fox. The updated software and additional content also are part of Jobs' strategy of getting consumers to buy more devices, including the iPhone and iPad.
The new iTunes 10 adds a social network for music called Ping, which lets users "follow" others, Jobs said. The company also introduced new designs for all its iPods, including a $49 Shuffle with 15 hours of music play and a smaller iPod Nano with a touch pad. The updated iPod Touch has a sharper screen, a front-facing camera, and features that allow video editing and face-to-face chats.
In a note, Wu said that "while these announcements were somewhat expected, we still found the overall news impressive and believe Apple has a strong iPod lineup for the upcoming holiday season."
Wu said he believes the new version of iTunes has positive longer-term ramifications for the company in strengthening its franchise, as Ping makes iTunes "stickier" for users by serving as a hub for interaction with friends and recording artists. "To us, iTunes now has a foundation and potential to become a powerful social networking play," he said.
The analyst said he thinks the new iPod Touch will be "a top seller," while the new iPod Nano has the "potential to be a sleeper hit."
"We continue to believe that AAPL is positioned to outperform in this tough macroeconomic environment with its defensible strategic and structural advantages and its vertical integration," Wu said.
On Sept. 1, Cisco and Itron (ITRI) announced an alliance to deliver an Internet protocol-based communications platform to the smart-grid market for electric distribution into homes and businesses. Itron will license and embed Cisco IP technology within its OpenWay meters and will distribute Cisco networking equipment and software as part of its smart-meter deployments.
In a note, Silverstein said the agreement advances Cisco's smart-grid networking market strategy and that Itron, one of the leading vendors in the smart-meter market, should help accelerate Cisco's penetration of the utility smart-grid networking market.
"Given that the announced relationship is nonexclusive, we suspect that Itron represents the first of a number of other such agreements that will enhance Cisco's smart-grid networking market access," Silverstein said.
The analyst said Cisco's smart-grid business has the potential to grow to "a multibillion-dollar-per-year revenue opportunity."
Zumiez: Janney Montgomery Scott equity analyst Adrienne Tennant maintained a buy rating and $19 fair value estimate on shares of Zumiez (ZUMZ) on Sept. 2.
On Sept. 1, the specialty sports apparel retailer said comparable-store sales increased 9.1 percent for the four-week period ended Aug. 28, vs. the average estimate by analysts of a 7.5 percent increase.
Tennant said in a note that Zumiez, with a diverse mix of popular brands and a "slightly increased" initial markup for its merchandise, has begun to show signs of improvement in its gross margin. "We believe the momentum begun in the early part of the year will continue" into the second half of 2010, she said.
The analyst noted that in a separate filing after the close of trading Sept. 1, the company said that due to a court settlement over a previously disclosed lawsuit, its second-quarter results have been restated to include a reduction in net income of $1.3 million, or a loss of 4¢ per share. Tennant lowered earnings-per-share estimates to reflect the settlement charge: for fiscal 2011 (ending January), to 50¢ from 55¢, and for fiscal 2012, to 75¢ from 79¢.