Software remains Apple's secret sauce of success - analystDespite of flurry of new iPods and other digital media announcements made by Apple Computer on Tuesday, its most significant introduction was a dramatically improved version of its iTunes software, one Wall Street analyst says.
"In view of the rampant speculation on rumor sites, it would have been next to impossible for Apple to pull a rabbit out of the hat. And it did not," Needham and Co. analyst Charles Wolf told clients on Wednesday. "There were no new iPods, only enhanced and cheaper versions of existing models."
What Apple did do, according to Wolf, was cement its leadership in the portable music player market and the online music market. And the analyst credits much of that previous success to the company's robust and easy-to-use software applications.
"Its the software, stupid," Wolf wrote in a research note. "It is an overused expression, but nonetheless software has been the secret sauce of Apples success in conquering the legal online music market where it has an 88 percent share in the U.S."
According to the analyst, Apples most significant announcement on Tuesday was an enhancement of iTunes software, which added numerous new features and even greater ease of use.
"The new features make the store even more user friendly than it was," he wrote. "In our opinion, iTunes represents the greatest barrier to competitors ever catching up with Apples multimedia ecosystem."
Still, the only product Wolf considered to be a 'new' product was Apple's still-in-development digital media hub, code-named iTV. Priced at $299, he believes iTV will represent arguably the easiest way for people to transfer content to their TVs.
"The significance of Apples Showtime announcements is that they should maintain, if not increase, the companys dominance of the MP3 player market and the music download market," the analyst wrote. "They also insure that Apple will be one of the major players in the emerging video viewing market both on portable devices and in the living room."
Wolf continues to rate shares of Apple a 'Buy' with a price target of $90. He's estimating the company to earn $2.15 and $2.50 per share for fiscal 2006 and 2007, respectively.