Apple iCloud + Steve Jobs = No iPhone5 This Summer

by Dan May 31, 2011 10:27 pm • Commentary

Apple‘s stock rallied a little more than 3% today, matching a 2 week high in the stock on the announcement that:

Apple® CEO Steve Jobs and a team of Apple executives will kick off the company’s annual Worldwide Developers Conference (WWDC) with a keynote address on Monday, June 6 at 10:00 a.m. At the keynote, Apple will unveil its next generation software – Lion, the eighth major release of Mac OS® X; iOS 5, the next version of Apple’s advanced mobile operating system which powers the iPad®, iPhone® and iPod touch®; and iCloud®, Apple’s upcoming cloud services offering.

Active readers of this site know that while I am a big fan of Apple products, the company and its long term prospects, I welcome an expectation reset from investors, Wall Street analysts and the press. The story is just a one way train…..maybe it keeps going that way, but I have seen this movie before and if you remember the end of those long drawn out epics (that start out great) they usually lose their way somewhere in the 3rd hour…..

AAPL faces its share of challenges in the years ahead as their first mover advantage in categories such as iTunes, iPod, iPhone and iPad will likely become less pronounced as these categories mature (see iTunes and iPod)…… Just coming up with the new gizmo is not going to be enough when you have every gadget maker in the world gunning for you and every content provider in the world looking to undercut you….My Strong belief is that the next 5 years for AAPL will be far more challenging than their last 5, and the company will likely have a new leader during this time.

Which leads me to my next point. Just because today’s announcement stated that Jobs will give the keynote doesn’t mean he is back full time and in a meaningful way.  AAPL needs to give investors a better sense for who will be in charge for the next 5-10 years….At this point it seems like they are doing their best “Weekend at Bernie’s” routine by rolling Jobs  out on stage every few months to introduce a new product and then he disappears until the next “magical and revolutionary” product we should buy. (in March Jobs unveiled the iPad2 and has been barely seen while on medical leave, and his appearance will be of much debate).  I find this sort of speculation very unsettling, but this is fair game in my opinion as there are very few companies on the planet whose prospects are so closely aligned as with Jobs and Apple…..the company would do itself, Job’s privacy and the rights of their shareholders a great service to set the record straight once and for all.

TRADE IDEAS: On Friday’s Options Action I suggested a tactical short trade idea into AAPL’s conference that had a less than 1% premium outlay, but offered a payout of 10 to 1 if the stock was down 7% by June expiration.

Luckily for anyone other than me, (who started legging into this put spread late last week) it wasn’t possible to get it in on those strikes at those levels, and it is worth much less today following the stocks 10 point rally.   I would suggest adjusting your strikes a bit higher and increase your odds of success, but try to maintain the low premium outlay.

As stated in the clip I think you want to be careful shorting stocks like AAPL outright, especially when it has underperformed the index and a lot of its technology peers.  If they have any surprise product announcements that people will actually care about the stock could make a new high…….DEFINE YOUR RISK, THIS IS NOT A HIGH CONVICTION SHORT AND I AM MAKING A CALCULATED BET AND DECIDING WHAT I AM WILLING TO LOSE.

AAPL can talk about software and cloud all they want, but what investors really want is the timetable for the new iPhone, and I believe without it the stock could be in for a rocky summer…….Also this is a company that does best when innovating on hardware and creating a category such as iTunes….when I think about the cloud I think about a highly commoditized service that has serious capital expenditures associated with it and plenty of potential customer service headaches…..Just ask AMZN.  While I see the usefulness of a cloud music offering I struggle with the overriding necessity of getting my music over a network that barely delivers phone calls….for now I will get my music the old fashioned way, synching it on my iPhone from iTunes on my iMac (wow that sounds so early 2011).