ML: \"fun new products\" a bit light for invitational event

"The new Mac mini is an incremental step in the ongoing Intel transition," analyst Rich Farmer wrote in a research note obtained by AppleInsider. "Though the long run prospects for Apple share gains on the Intel platform are likely to be promising, we continue to be concerned about brand risk from potential glitches in the Intel transition as well as delayed availability of native software (Adobe, Microsoft)."

By integrating an Intel graphics processing unit to the petite computer — instead of the previously used ATI discrete graphics card — Apple was able to speed up execution in the Intel transition, the analyst believes. But in the long run, Intel's increasing vertical integration into systems components is a strategic threat for the PC ecosystem, including systems vendors, he said.

Meanwhile, Farmer believes the iPod Hi-Fi and leather cases are just the latest examples of Apple's strategy to harvest a greater percentage of the accessories market derived from the booming iPod installed base. According to the analyst, this strategy will likely suit Apple fine in the short term but could create iPod ecosystem risk over time.

"In the long run, however, by competing with its ecosystem partners with increasingly aggressive moves into categories such as speakers and the implementation of an iPod connector license 'tax', Apple risks alienating its ecosystem and creating a margin umbrella that is ripe for disruption from other platforms over time, in our view," he wrote.

Farmer believe Apple's new iPod Hi-Fi boombox offering compares best with the Bose SoundDock digital music system which retails for $299. "For an extra $50 the iPod Hi-Fi product offers battery power capability for music on the go and audio inputs which allow for streaming music if used with the optional Airport Express," he wrote. "The relative quality of audio between the iPod Hi-Fi and the Bose SoundDock is not clear to us."

Overall, the analyst was not overly impressed with the company's new products, of which many believe combined for a lackluster media event.

"We wonder if the announcements were substantial enough to merit an invitational media event and suspect Apple needs to be judicious if it expects to continue to convert journalists into marketing instruments with its aura of secrecy," Farmer wrote.

He said pricing for the iPod Hi-Fi and leather cases suggests Apple believes it can position its accessories at a premium to competing alternatives.

"Sell through will be an important test of the Apple brand," Farmer wrote. "Initial blog activity (an admittedly unscientific measure of customer sentiment) reflected some skepticism."

Merrill Lynch sees Apple stock as neither inexpensive nor expensive. However, the firm sees "insufficient magnitude" to recommend the company's shares at this time.