In a sequel to his original research note suggesting the PlayBook’s battery life is “relatively poor” compared to rivals’, Kaufman Bros. analyst Shaw Wu reiterates that claim, saying he would be “very surprised if PlayBook matches anywhere near the battery life of the iPad at 10 hours unless it uses a larger battery.”

The reasons for this are threefold:

1. The PlayBook supports Flash, and Flash is a resource hog. Says Wu, “As seen in recent tests for the new MacBook Air, use of Flash can cut battery life in half….From our understanding, the poor battery life of early PlayBook units may be due to its incorporation of Adobe Flash.”
2. QNX, the operating system on which PlayBook is to run, wasn’t designed for it. It was intended for devices drawing power from a wall socket or car battery, not mobile platforms whose power sources are necessarily limited by their own mobility.
3. RIM’s implementation of power management is not as well-integrated as that of its rivals–particularly Apple, whose homegrown A4 system-on-chip enables the company to deliver superior battery life.

Obviously further work is needed to optimize the device’s battery life; RIM admitted as much in its rebuttal to Wu’s first note and, to be fair, this is a pre-release device–a work in progress. RIM still has a few months left to optimize the PlayBook’s battery and get it to that “comparable” level it claims.

But even fully optimized, Wu doesn’t see it matching the iPad.

“Our sources indicate that the best that PlayBook can probably deliver is six hours as offered by the Samsung Galaxy Tab, which is nearly half of that offered by iPad,” he concludes. “And that is with significant re-engineering.”

That’s RIM’s rebuttal to Kaufman Bros. analyst Shaw Wu’s suggestion that the PlayBook’s battery life is “relatively poor” compared to rivals–a claim the company says is based on the observation of a pre-beta version of the device.

“Any testing of battery life to date by anyone outside of RIM would have been performed using pre-beta units that were built without power management implemented,” RIM said in a statement. “RIM is on track with its schedule to optimize the BlackBerry PlayBook’s battery life and looks forward to providing customers with a professional grade tablet that offers superior performance with comparable battery life.”

Ah, but comparable to what? And speaking of “comparable,” what happened to “way ahead”? Wasn’t that what RIM co-CEO Jim Balsillie said of the PlayBook’s performance during the company’s last earnings call? “I think there’s going to be a rapid desire for high performance. And I think we’re way ahead on that. And I think CIO friendliness, we’re way ahead on that.”

And what does RIM have to say about Wu’s suggestion that it may be forced to delay the PlayBook’s launch to optimize its battery life? Nothing beyond the oblique assertion that it’s on track with an undisclosed internal schedule. Question is, is that schedule still based on an early 2011 launch or one in the May quarter as Wu suggested. Because if it’s the latter, that means the PlayBook could conceivably arrive at market after the next-generation iPad.

Sources tell him the tablet currently lasts just a few hours per charge, compared with rivals like Samsung’s Galaxy Tab, which lasts about six, and the iPad, which lasts upward of 10. If true, that’s an untenable situation for RIM, which really needs to hit the mark with the PlayBook, and it may cause a delay of the launch–if only for a bit (to be fair, Wu is talking about an unreleased device that’s still in development and months away from market).

“From our understanding, this [is] likely why RIMM pushed out its launch to the May 2011 quarter,” Wu writes. “Keep in mind that QNX (the OS on which PlayBook runs) wasn’t originally designed for mobile environments but rather for devices like network equipment and automobiles where battery life isn’t as much a constraint.”

In other words, as promising as plugging QNX into a tablet form factor with a dual-core processor and a gig of RAM sounds, it’s proving to be a bit of a challenge. So what’s the solution? Most likely a bigger battery. But obviously that will add to the heft of the device and perhaps require a design concession or two.

Given that, Wu takes a conservative view of PlayBook’s prospects; he figures RIM will sell 700,000 units in 2011, far less than the one million to eight million that other analysts have been calling for. “As we have said before, we are not convinced that tablets outside of the iPad will see high volume success,” he concludes.

UPDATE: RIM finally got back to me with a comment: “Any testing or observation of battery life to date by anyone outside of RIM would have been performed using pre-beta units that were built without power management implemented. RIM is on track with its schedule to optimize the BlackBerry PlayBook’s battery life and looks forward to providing customers with a professional grade tablet that offers superior performance with comparable battery life.”

The one million units is in line with his forecast, and a bit ho-hum given it equals just $400 million annually in revenue on an $88 billion top line. The units might be “significantly higher” if Apple TV had access to the 300,000 apps in the Apple App Store, writes Wu.

“One questions many investors have asked us is how does Apple add multi-touch capability to a TV?” writes Wu. “Our answer is the ability to connect the Magic Trackpad, similar to adding multi-touch to its desktop macs including iMac, Mac Mini, and Mac Pro.”

Read the rest of this post on the original site

“From our understanding, the Verizon negotiations are not finalized with important details still being ironed out, including technology and economics,” Wu said in a note to clients this morning. “We think it is premature to rule out T-Mobile or Sprint.”

Or both of them, together. As Wu notes, adding T-Mobile and Sprint as additional carriers would almost be like adding Verizon (VZ). Together, Sprint (S) and T-Mobile have about 82 million subscribers. Verizon has 93 million subscribers.

Of course, bringing Apple’s (AAPL) iPhone to Verizon would serve another purpose as well–striking a blow against Google’s (GOOG) Android, which has claimed the carrier as its home turf. “We believe the argument for Apple to pursue Verizon sooner than later is to address the growing presence of Android,” says Wu. “What better way to do that than where Android has seen the majority of its success?”

In any event, Wu seems certain that AT&T (T) will not be the only iPhone carrier in the States next year. “From our checks with industry and supply chain sources and a recent SEC 10-Q filing by AT&T mentioning that exclusivity with ‘a number of attractive handsets’ could end, we have conviction that the iPhone could likely finally be at another carrier besides AT&T here in the U.S. in 2011 and potentially at Verizon in 2011 or 2012.”

“Based on our more detailed analysis of supply chain data we are shifting our iPhone assumptions to latter quarters due to the high likelihood that an inventory drawdown and screen supply constraints could impact near-term shipments over the next two quarters,” Wu wrote. “We believe most Street estimates have not factored this in and thus we believe consensus at 8.5 million iPhones for the June quarter may likely prove too aggressive.”

No such issues for the iPad, though. For that device, Wu raised his forecast. He now expects June quarter iPad sales of 3.5 million–up from 3.3 million. For calendar 2010, he’s looking for sales of 10 million–up from 9.7 million.

“We don’t think the antenna issue is that big of a deal where it would warrant a product recall,” he said in a note to clients today. “The reason is that most users have a case anyway to protect their iPhone and to customize to their personal preferences.”

And if things do go downhill, there’s an easy solution: Apple (AAPL) offers a discount on its $29 iPhone 4 bumpers or includes one for free with every iPhone 4 purchase.

[Image credit: Just avoid holding it in that way.]

It’s going to be T-Mobile.

That’s the theory put forth by Kaufman Bros. analyst Shaw Wu, who argues that the carrier is a more likely candidate than Verizon (VZ) because its network wouldn’t require Apple (AAPL) to build a separate iPhone to support it.

“Currently, T-Mobile’s 3G service (UMTS/HSPA) supports 1700 MHz and 2100 MHz frequencies while AT&T supports 850 MHz and 1900 MHz frequencies,” Wu wrote in a note to clients today. “Interestingly, both the new iPhone 4 and iPhone 3GS support 3G at the 2100 MHz frequency and, from our understanding, the technical hurdle to support T-Mobile is minor compared to supporting CDMA technology at VZ and Sprint.”

That would certainly make the transition to multiple carriers in the U.S. easier for Apple, which would surely prefer not to have to customize the iPhone to gain increased distribution. But the payoff would be significantly reduced.

Today, Verizon is the largest U.S. wireless carrier, with 93 million subscribers. T-Mobile has just 34 million. A deal with the former would nearly double the iPhone’s addressable market; a deal with the latter would increase it by a little more than a third.

Unless Apple brought the iPhone to both T-Mobile and Sprint (S). Says Wu: “It is notable that signing up both T-Mobile and Sprint would almost be the equivalent of signing VZ.”

Of course, as Wu himself notes, Sprint’s network is CDMA and would require a customized iPhone, just like Verizon. So if Apple were to sign a deal with Sprint, it may as well sign one with Verizon.

In an inspired bit of entrail reading this morning, Kaufman Bros. analyst Shaw Wu says Apple (AAPL) may have a libretto of big WWDC announcements. “Other announcements we are picking up that could potentially be made are iTunes.com, a web-based version of its iTunes client, and new Mac refreshes with faster processors and graphics, namely the Mac Pro and MacBook Air, which were last refreshed in March and June 2009, respectively,” he wrote in a note to clients this morning.

An interesting bit of speculation. Certainly, it’s conceivable that the Mac Pro and MacBook Air get updated. As Wu notes, it has been quite a while since the last one. But iTunes.com, the online music service Apple is believed to be building on its Lala.com acquisition? That might be a bit of a stretch, as my colleague Peter Kafka reported in late April.

“Sources tell me that in the past few weeks, Apple has started signaling to the labels that it’s interested in a Web-based version of iTunes, its dominant music retail platform,” Kafka wrote on April 30. “But those conversations are preliminary at best. So if you’re expecting to hear about an ‘iTunes.com’ offering in the near future–like during Apple’s June 7 developer conference–you’re likely to be disappointed.”

PREVIOUSLY:

• Gaming WWDC: A New iPhone–But Not on Verizon

Evidently there’s quite a bit of sales momentum in the iPad 3G, despite its $129 price premium over the Wi-Fi-only version and monthly data costs. Wu upped his forecast iPads to two million units from one million. Meanwhile, Mac sales have been ramping up thanks to the recent debut of new laptops.

“Our sources indicate that Mac momentum is strong helped by a recent significant refresh of the MacBook Pro to new Intel Arrandale processors, offering much better price-performance and an industry best 8-10 hours of battery life,” Wu writes.

“While it is still early,” the analyst adds, “we believe the Mac business is tracking to its third consecutive quarter of 20%+ Y/Y unit growth indicating further share gains.”

With that in mind, Wu has raised his projected Mac sales for the quarter to 3.2 million, a slight increase from his previous forecast of 3.1 million.

Apple (AAPL), as it always does, left plenty of room for upside surprises to revenue when it last reported earnings. Sounds like the company is more than likely to deliver on them when it next reports.

“The $1.2B transaction value represents <10% of HPQ’s current cash balance and only ~1% of HPQ’s market value,” Deutsche Bank analyst Chris Whitmore wrote in a note to clients this morning. “Meanwhile, the payoff could be very sizable to HP who has the potential to capture more value in large, rapidly growing markets (smartphone, Slates/tablets, etc).”

BMO Capital Markets Keith Bachman described the deal as a savvy one as well. “We see this as a relatively low-cost bet to meaningfully change the consumer business model and margin profile for a business (PCs) that get little to no current respect from investors,’’ he said.

Over at Kaufman Bros., analyst Shaw Wu was similarly enthusiastic, saying HP’s acquisition of Palm could materially improve its consumer business. “We like the deal as we believe it makes longer-term strategic sense and gives HPQ access to a key piece of intellectual property in webOS and better control of its destiny in the mobile devices space,” he said. “We have always believed that webOS had some value as one of three vertically integrated platforms in the smart phone space (the others being AAPL and RIMM). However, we see it as much more than smart phone technology as we believe webOS can be leveraged for use in other mobile devices including tablets, netbooks and potentially even PCs one day.”

Morgan Keegan analyst Tavis McCourt was a bit more cautious in sizing up the deal, wondering if Palm’s purchase price wasn’t a bit too high. Yet he, too, acknowledged that the upside here is significant if HP plays its cards right. “Was Palm worth $1.2 billion?” he asked. “No one will know for a few years we suspect, but if HP is successful in turning this into their consumer platform, this will go down as a ‘home run’ acquisition, if not, we suspect it will have limited impact relative to HP’s overall business.”

Faily rosy sentiments, these. That said, there were a few dour ones in the mix as well. Forrester Research analyst Charles Golvin decried the deal as bad strategy. “The good news is that HP made a strong move toward becoming a player in the mobile market,” he wrote. “The bad news is that it’s the wrong move. Palm could be valued for its brand, its intellectual property, its platform, or its people. HP doesn’t need the Palm brand; the IP helps an existing player not a new entrant; we don’t think the WebOS platform is viable long term in the face of its competition; and HP could sweep up Palm’s people individually at a much lower price. HP needs a strong presence in mobile, but Palm doesn’t deliver that.”

Then there was this, from Kevin Hunt of Hapoalim Securities who raised an eyebrow over Palm’s latest 8K filing:

“So HP is paying over a billion dollars for a company with rapidly decelerating sales and units, with almost no customer traction, and who would have likely been bankrupt in 3 quarters,” he noted. “… In effect, H-P is paying $1.2 billion for an operating system and some engineers, and they will have to fund significant losses for an extended period before they have any hope of making money in the smartphone space.”

Hard to take issue with that , given the extent of Palm’s financial deterioration. But as I noted here yesterday, this isn’t simply a smartphone play. It’s far, far broader than that. HP is buying an OS that will give it control over both the hardware and software user experiences, something it’s never had before. Is $1.2 billion too high a price to pay for that? We’ll see …

“Our sources indicate that a key feature of the forthcoming iPhone 4.0 software will be a full multi-tasking environment where third-party apps will also be able to be run simultaneously and/or in the background along with AAPL’s own apps,” says Kaufman Bros. analyst Shaw Wu, who notes that such functionality is a necessity now that the iPad has arrived.

“While we believe this is an improvement for all iPhone and iPod touch users,” Wu adds, “we believe this will be particularly important for the iPad, due to its much faster processor and much larger screen where users will more likely want the capability to run multiple applications much like most do with their PCs and Macs.”

The upshot, according to Wu: “We believe this will allow Apple to deliver a fuller and more differentiated experience on the iPad helping drive greater adoption.”

Seems a reasonable prediction. Certainly, multitasking for non-Apple applications has been something iPhone and iPod touch users have wanted for quite some time. With the iPad–Apple’s third iPhone OS device–at market, now may be the time to roll it out.

Beyond this, Wu sees a few other important announcements coming out of the Apple (AAPL) event–one, perhaps, related to more powerful and sophisticated games and another related to a mobile advertising API.

Says Wu: “With its growing focus on mobile devices and the apps platform, we believe Apple will eventually integrate an advertising platform into the iPhone SDK. In Jan-10, Apple acquired Quattro Wireless, a mobile advertising company. With just 4 months to integrate Quattro’s mobile platform into the SDK, there is a chance the service is not completely ready for launch, but we believe it is likely that Apple will announce it at the 4/8 event.”

“We differ from consensus in that we are not concerned with lower number of BlackBerry Apps as we believe quality is more important than quality,” Wu writes, noting that today’s upgrade of Java and Web-based development tools should make it easier to create feature-rich apps for the BlackBerry.

Read the rest of this post on the original site

The scribbling masses on the Street worked overtime this weekend, cranking out their impressions of the launch of Apple’s heavily heralded tablet device. (Seriously, does another company out there get the positive press of Jobs & Co.?) Here are some of the takeaways we thought worth re-trumpeting.

Cross Research: “As has been widely noted, the iPad lacks Flash which does impact the user experience. While we were not impacted by the lack of Flash, we note that games and other media sites do require it. Our children were unable to use clubpenguin.com and webkinz.com, although interestingly, the Disney.com (DIS) website now has a version optimized for the iPad (including exclusive iPad movie previews).”

Read the rest of this post on the original site

• Kaufman Bros. analyst Aaron Kessler this morning upgraded BIDU to Buy from Hold, with a $690 price target. “While there is still uncertainty into the final outcome of Google’s ability to operate an uncensored search site in China, we believe that in the near-term it is very likely the government would restrict access,” he writes. Kessler said he is assuming an 80 percent probability that the government would restrict access.

Read the rest of this post on the original site

But analysts aren’t so sure. In a note to clients this morning, Kaufman Bros. analyst Shaw Wu wondered just how much good the AT&T (T) deal will do for Palm (PALM) given the pricing of its smartphones. The company is selling the Pre Plus and Pixi Plus for $149.99 and $49.99, respectively, with a two-year service agreement and after a $100 mail-in rebate. Hardly a compelling proposition when the prices of competing devices like Apple’s (AAPL) iPhone and Research in Motion’s (RIMM) BlackBerry are significantly lower.

“While we are pleased to see PALM expand its footprint, we are unsure how meaningful the impact will be as we believe AT&T is the most competitive carrier out there being the exclusive partner for iPhone in the U.S,” says Wu. “We believe PALM’s price points are arguably too high when one can get an iPhone 3G for $99 and a BlackBerry for as little as $9.99.”

Exactly. And beyond price, there is the issue of AT&T’s relationship to the iPhone, which has spiked both its subscriber numbers and wireless data revenue since the carrier first began peddling it. Is AT&T is going to put the Pre and Pixi out in front, given what the iPhone has done for the carrier’s financials? Does Palm’s AT&T deal include a commitment to aggressively market and sell its devices? Because it’s going to need one if it’s to compete with the iPhone on its home turf.

As Palm CEO Jon Rubinstein observed on the company’s latest earnings call, launching a pair of new smartphones on a carrier that’s already heavily invested in a hero device–as Verizon (VZ) is with Droid and AT&T is with the iPhone–is no easy task. Said Rubinstein: “If we could have launched at Verizon prior to the Droid, I think we would have gotten the attention the Droid got.”

But you didn’t. And now you’re launching on AT&T after the iPhone, a device with far greater critical mass than Droid. Why will things be any different this time around?

FURTHER READING:

• Exercise in Futility? Palm Pre Plus, Pixi Plus Headed to AT&T
• Palm: Pssst. Wanna Buy 1.15 Million Smartphones?
• Palm Pileup: Weak Smartphone Sales and a Gruesome Q4 Forecast
• Could Be Worse, Could Be Raining: Palm’s AT&T Launch Delayed?
• Could WebOS Licensing Be Palm’s Salvation?
• Palm’s Salvation? Less Push, More Pull.
• And if Palm’s Project JumpStart Doesn’t Work Out, There’s Always “Project Defibrillator”
• Double Face-Palm: Analysts React to Palm’s Lowered Guidance
• Time to Start Looking for a Buyer, Palm?
• 2010: Year of the Palm? Maybe Not…
• Analyst: Palm May Be Acquired in the Next Two Years

Remarking on Palm’s gruesome third quarter during an earnings call yesterday, CEO Jon Rubinstein called the company’s performance “extremely disappointing to me personally.” This sentiment seems to be widely held among investors, who are dragging the company’s shares through the mud today–at $4.66, Palm is down 17.52 percent as I write this–and among analysts questioning whether Palm can ever pull off the turnaround for which it’s striving.

Analysts issued a handful of research notes on the company this morning and they are all viciously negative. The headlines proclaim that Palm’s brand value has collapsed, its financial performance is a disaster, and its execution missteps in a business as competitive as the mobile market have left its prospects dubious.

Over at Canaccord Adams, Peter Misek essentially threw in the towel on the company: “We believe that Palm’s troubles will only accelerate as carriers and suppliers increasingly question the company’s solvency and withdraw their support,” he wrote.

“With what appears to us to be roughly 12 months of cash on hand, an accelerating burn rate, a complete lack of earnings visibility, and substantial debt and preferred equity,” Misek added, “we no longer see any value in the company’s common equity. As such, we are reiterating our SELL recommendation and reducing our target to US$0.00 (previously US$4.00).”

Then there was this from Kaufman Bros. analyst Shaw Wu: “While we believe PALM has some value with its webOS and tight integration of hardware and software, we are unsure of the company’s prospects as an ongoing concern.”

And this from Morgan Keegan analyst Tavis McCourt: “It is certainly looking less likely that Palm can execute this turnaround on its own, but the company has at least one more chance with new hardware later this year to try and create some real consumer demand for webOS.”

And finally, this from Needham and Company’s Charlie Wolf: “Palm appears to be in a no-win situation. The company could invest even more in marketing the Pre and Pixi. But it’s unclear whether Palm could ever spend enough to reach a position where Pre and Pixi sales were sufficient to cover its marketing bill and return the company to profitability.”

Wolf concludes that “In the mean time, time is running out. Supported by an increasing number of smartphone manufacturers, the Android juggernaut is continuing to gain steam. And the day when Microsoft (N/R) launches Window Phone 7 and rejoins the spending party is drawing closer.”

If it’s true that bad news begets bad news, Palm is in for a very rough time of it in the months ahead. The company has already lost half its market value since the year began. Time for a takeover? Perhaps, though Rubinstein seems intent on staying the course.

“There’s all kinds of speculation out there that we are going to get bought, that we are not going to get bought,” Rubinstein said on the earnings call Thursday. “We’re not going to comment on any of those. Obviously, we are a public company. And if there’s a reasonable proposal, of course the Board has to consider it. But, that being said, our focus since the day I arrived here, and that’s almost three years ago now, is to build a great company with a great mobile platform and great products. And that has been our focus.”

FURTHER READING:

• Palm Pileup: Weak Smartphone Sales and a Gruesome Q4 Forecast
• Could Be Worse, Could Be Raining: Palm’s AT&T Launch Delayed?
• Could WebOS Licensing Be Palm’s Salvation?
• Palm’s Salvation? Less Push, More Pull.
• And if Palm’s Project JumpStart Doesn’t Work Out, There’s Always “Project Defibrillator”
• Double Face-Palm: Analysts React to Palm’s Lowered Guidance
• Time to Start Looking for a Buyer, Palm?
• 2010: Year of the Palm? Maybe Not…
• Analyst: Palm May Be Acquired in the Next Two Years

With its iPhone, Mac and iPod businesses all performing well, Apple (AAPL) will likely blow the doors off Wall Street’s already heightened expectations. “Despite continued difficult macroeconomic conditions and ever rising investor expectations, we anticipate Apple could still post material upside to recently raised consensus estimates, not to mention its conservative guidance, driven by strength in all three major product lines, particularly its iPhone business,” Wu wrote in a research note distributed today.

Given the strong momentum in Apple’s Mac product line, Wu expects the company to ship 2.9 million Macs, a bit more than the consensus of 2.85 million.

Wu also expects iPhone shipments to hit a new record: “We believe Apple could ship 9.5 million iPhones (consensus at 8.8 million), a new quarterly record, beating its previous record of 7.4 million iPhones set last quarter….Our sources indicate continued strong momentum in the U.S., a more material contribution from Asia-Pacific (China and Korea); and a stronger-than-expected uptake in Europe due to multiple carriers and more attractive prepaid service plans.”

That estimate, 9.5 million iPhones, is quite a number and one that, as Wu notes, would put Apple impressively close to Research in Motion (RIMM), which shipped 10.1 million BlackBerrys in its last quarter.

For the December quarter, Wu expects Apple to earn $2.15 per share on sales of $12.4 billion, significantly more than consensus estimates of $2.04 per share on sales of $11.9 billion and a far cry from Apple’s typically conservative guidance of $1.70-$1.78 per share on sales of $11.3 billion to $11.6 billion.

Kessler cited four reasons for the upgrade:

• Checks and company comments indicate firming in display ads.
• Checks with search engine marketers find Yahoo search performance in Q4 tracking much better than ComScore (SCOR) data indicate.
• Regulatory approval of Microsoft (MSFT) deal in in early 2010 could serve as a catalyst.

Read the rest of this post on the original site

Verizon.

This according to Piper Jaffray analyst Gene Munster, who says there’s a 70 percent chance that the carrier will add Apple’s super-smartphone to its lineup by the middle of 2010.

With AT&T’s (T) exclusive deal to carry the iPhone in the U.S. expiring next year, Apple (AAPL) has certainly considered such a move. It would be silly not to. Verizon’s (VZ) postpaid subscriber base is not only larger than AT&T’s, it’s untapped.

That’s an important differentiating factor given that Apple has an diminishing opportunity to attract new iPhone users from AT&T’s subscriber base. Says Munster: “Currently, the iPhone is available to 82 million AT&T subs in the U.S.; adding Verizon would more than double the addressable market, adding 89 million U.S. consumers.”

That’s certainly a compelling argument for signing Verizon up as an iPhone carrier, though whether Apple will do so remains to be seen. As Munster himself concedes, there’s a 30 percent chance that the company won’t ink a deal with Verizon.

According to other observers, that’s a conservative estimate. Kaufman Bros. analyst Shaw Wu said recently that 2010 is an unrealistic ETA for a Verizon iPhone. 2012 is far more likely, according to Wu.

“While we believe VZ is likely inevitable at some point when 4G technology rolls out in 2012 or so, we believe Sprint and/or T-Mobile are more willing partners for Apple in helping maintain margins and customer controls,” the analyst wrote in a note to clients. “From a technology perspective, we believe T-Mobile may have an advantage with a similar 3G UMTS/WCDMA network as AT&T.”