iDay Is Here!

The iPhone goes on sale today. Now we will see if Apple's manufacturing, distribution and quality control are as good as its design and promotion capabilities.

Will the iPhone be another iPod? Or will it be a Newton or a Zune?

Tomorrow and for the foreseeable future, the news will be all about the SNAFUs and problems that happen with iPhone and about how customers have been disappointed. The story will no longer be about what an amazing thing that Steve Jobs has wrought. Among stock traders, there is a saying; "Buy on rumor, sell on fact." According to this wisdom, if the word on the street is that XYZ Corp. is going to be acquired, you ought to buy XYZ Corp. stock. When the deal is announced, sell it. If you followed this wisdom, you bought AAPL stock in early January when the iPhone was rumored and you sell it today. If you did that, you paid about $85 per share and right now you can sell for about $122 per share. That is a gain of 44% over 6 months. Not bad.

And what about AT&T which provides phone service for the iPhone? This is not Alexander Graham Bell's AT&T. It is the bastard child of Wall Street, having been cobbled together after the telecom bust. The powers that be at AT&T know all about junk bonds, leveraged buyouts and corporate restructuring (AKA layoffs). They know how to play hardball. It remains to be seen if they can work with Apple and provide the technology, customer service and innovation that iPhone customers will expect.

I own a few shares of AAPL. But I am not selling today or any time soon. I didn't buy the stock because of the iPhone. I didn't buy it because of the iPod or the iMac either. The iPod is an attractive business because of its market share. The iMac certainly has its partisans, but I would not be surprised to see it sold to Lenovo before long.

The reason why I like Apple's stock over the long term is iTunes. What I like about iTunes is that it has a dominant position in the digital music business. The digital music business has "increasing returns to scale," and I believe that Apple can parlay this position in digital music into a dominant position in online movies and television shows. This means lots of upside for Apple and its shareholders, including me.