No Surprises, No Disappointments for Apple

News Analysis: Analysts say the launches of Mac OS X Leopard and the Intel-based Mac Pro should be enough to maintain Apple's momentum in the fourth quarter.

Although industry watchers have speculated for months about new video iPods and the possibility that the company may offer movie rentals, Apple CEO Steven Jobs left the stage at the Worldwide Developers Conference in San Francisco without mentioning either.

During his talk, Jobs focused instead on the refreshed Macintosh line and the anticipation of the new Mac OS X Leopard.

While some may have been disappointed with that announcement, several analysts agreed that Apple Computer wanted to continue its strong momentum in Mac sales, give its developers a taste of its new operating system in the face of Microsofts upcoming rival Windows Vista release and save the consumer products for later.

"The Street is somewhat disappointed that todays WWDC announcements are in line with expectations," Gene Munster, a senior research analyst with Piper Jaffray & Co., in Minneapolis, wrote about the fallout from Jobs Aug. 7 keynote. "We believe the best approach to looking at Apples product roadmap is to focus on a 6-9 month timeframe."

During the keynote, Jobs and other Apple officers pulled back the curtain on several products that had been anticipated, including the new Mac OS X Leopard, the Mac Pro desktop, which includes two Xeon chips that run up to 3.0GHz, and an Intel-based Xserve.

/zimages/1/28571.gifClick here to read more about announcements at Apples WWDC.

While the meeting lacked the excitement of a new and improved iPod or another Apple innovation, the announcement of the new features in Leopard was just what Tim Deal, a senior analyst at Technology Business Research, in Hampton, N.H., was looking for from Jobs, he said.

"The Worldwide Developers Conference is for professional-oriented products and I think that Apple was trying to build up developer loyalty and generate developer support," Deal said.

/zimages/1/28571.gifRead more here about new features in Mac OS X Leopard.

Several analysts agreed that Apple appears to have tried to build on the success the Mac line had in the third quarter, when the company sold 1.3 million Macs, and continue that momentum into the fourth quarter.

Deal said he believes Apple wants to create a lot of anticipation for the spring 2007 release of Leopard as Microsoft prepares for the January release of its new operating system, Vista.

While Jobs joked to his audience that he was holding back Leopard secrets to discourage Microsoft from stealing those ideas, Deal found many surprises in the improvements to applications such as Time Machine, a data and file recovery system, and iChat.

"Its a pretty huge deal and many of us dont think about that on a day-to-day basis," Deal said of Time Machine. "Its a compelling feature."

The only problem, as Deal saw it, was how Apple would take care of its legacy customers and upgrade older models.

On the Mac front, Richard Shim, an analyst at IDC, in Framingham, Mass., said he thought Apple had hit the mark with its price for the new desktop, and by changing over the entire line to using Intel processors within 210 days (the company originally anticipated completing the switch by the end of 2006).

By giving the Mac Pro a starting price of $2,499, Apple signaled that it was ready to compete more aggressively with other computer makers, Shim said.

"They have good momentum right now and they feel the retail space is the engine for growth," he said.

The Mac Pro is ready to ship but the Xserve will not be on the market until October.

Despite the lack of surprises, and Apples continued internal investigation concerning irregularities with stock options, financial analysts continue to give Apple positive ratings.

Merrill Lynch maintained its buy recommendation and Piper Jaffray continued its outperform rating for Apple.

As for the newer versions of the iPod and some of the other consumer products that have been the talk of the Web during the past several months, Van Baker, an analyst at Gartner, in Stamford, Conn., said he expects Apple to have additional announcements by the end of the year.

"Frankly, the iPod has been a tremendous success and now Apple wants to get more behind the Mac, and its had excellent momentum so far," Baker said.

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