My wife, three of my children, and I all flew to College Station, Texas for Christmas. That’s because my oldest son, Ryan, is a student at Texas A&M.
I have a very hard time watching my little birds leave the nest, so getting all four kids under the same roof for the holidays was all I could ever ask for.
My children, however, were a lot more interested in what was under the Christmas tree than who was sitting around it. Luckily, Santa came through — the three oldest children got shiny, new Apple iPod Nanos.
Sure, they’ll use the ubiquitous media devices to listen to music that I don’t like and can’t understand. But Ryan also had a practical reason for wanting one so badly — downloading podcasts of some of his college classes. Let me explain …
At Colleges, Podcasts Are
Becoming the New CliffsNotes
If you’re a dinosaur like me, the term “podcasts†is a foreign word. Podcasts are like radio broadcasts that come as digital files. Users can download them (automatically, if they want) to a handheld music player or computer.
Initially, podcasts allowed hobbyists to distribute their “radio†shows to other Internet users. But a bunch of real-world applications quickly sprung up. For example, colleges around the country are now allowing students to download podcasts of class lectures.
When I attended the University of Washington, you had to attend the class to hear the professor’s lecture. Today, my Alma Mater is using podcasts to promotes its “anytime, anywhere†learning initiative.
My first reaction to all this was that podcasts would encourage college students to spend more time partying and less time attending class.
“That’s not true, Dad,†Ryan told me. “There are lots of legitimate reasons why college students miss class. They could be sick or have to attend a funeral. Students with jobs get pressured by their employers to cover a shift. What if you’re dealing with a personal issue, like losing your girlfriend?â€
I have to admit, Ryan’s right. While some students will certainly abuse the system, podcasts have the potential to radically transform the educational process.
International students, for example, with limited English skills could replay lectures to increase their comprehension. Moreover, students from anywhere in the world could effectively take classes from our best colleges without stepping foot in a classroom.
For investors, here’s the most important aspect of podcasts … they’re just one more reason for the iPod’s “must-have†status.
100,000 iPods a Day
Means Apple Gets Paid
The very name “podcast†shows you just how popular Apple’s iPods are. The devices have become virtually synonymous with downloading digital audio files.
Apple is hardly an undiscovered stock, but the company’s business is flat out booming. In the most recent quarter, sales increased 32% to $4.84 billion, while profits jumped 27% to $0.62 a share!
That’s no surprise because iPods were flying off the shelves. Apple shipped 8.73 million players during the quarter, 35% more than a year earlier.
The iPod’s success allows Apple to sell other services and devices to consumers. For example, Mac computer sales ballooned to 1.61 million last quarter. That’s up 30% from last year and a company record for any three-month business period!
On top of that, Apple is supposedly getting ready to enter the cell phone market. The company — known for its meticulous designs — will probably offer a full-fledged personal media device that includes a camera, a vivid color monitor, complete iTunes features, and a cellular phone.
We might see this new product on shelves as early as this year. In fact, Apple’s CEO, Steve Jobs, is speaking at the MacWorld Expo later today. Since he generally uses these events to introduce new products, I wouldn’t rule out an official announcement this afternoon.
But even if the product takes some time to reach stores, I expect Apple’s phones will fly off the shelves when they’re released. The company’s sales and profits could surge.
However, there’s even more to the story. Because if we dig a little deeper, we’ll find …
Taiwanese Companies Get
Rich Building Apple’s Devices
According to one rumor, Apple placed an order for 12 million cell phones from Taiwan-based contract manufacturer Hon Hai Precision (2317.TW on the Taiwan Stock Exchange). Delivery is supposed to happen in the first quarter.
If Hon Hai Precision does end up with the contract for Apple’s new phone, that could mean big things for the company. After all, I know another Asian company making a bundle from the iPod megatrend.
I’m talking about Foxconn Technology (2354.TW on the Taiwan Stock Exchange), the company that assembles Apple’s iPods. Foxconn operates a huge factory complex — known as “iPod City†— in Longhua, China.
Foxconn has made a fortune from Apple’s business. And the stock has skyrocketed. Right now, the company’s shares are trading for slightly more than $400 (Taiwan) and Apple is in the mid $80s. But at the beginning of 2003, Foxconn was at $19 and Apple was at $7. That means Apple jumped roughly 1,200%, while Foxconn gained approximately 2,200%!
Remember, for every hot U.S. stock, there’s usually an Asian counterpart also going gangbusters. That’s why you should consider adding some Asian spice to your stock portfolio this year. It could be the most profitable decision you make in 2007.
Best wishes,
Tony
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MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Wendy Montes de Oca, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.
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