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Monday, September 25, 2006

The Trouble With Apple’s Run-Up: The Stock At $73

The last time Apple’s stock was at $73 was February. Odd, because it would be hard to argue that things have improved at the company.

Since the beginning of the year, Apple has run into options backdating problems and a number of new competitors to the iPod, like the new Sandisk MP2 players, and the Microsoft Zune have emerged.

It also appears that Apple does not have a large volume of films for its online video store and that companies like Amazon are launching their internet film businesses with larger libraries of titles.

There is a theory that as Apple introduces computers that run the Windows OS, sales of Macs could improve. But, for the time being, it is a theory. The company’s decision to move to Intel chips is also not clearly a winning move.

Apple only needs one of these issues to move in the wrong direction to cut investors confidence. Any evidence that management or the board had significant involvement in the option dating issues would almost certainly hurt Apple’s share. But, what may well be worse is any sign that the iPod’s “long tail” is not driving Mac share in the computer market, of that margins for the iPod itself are being undermined by new competition.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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