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Palm and RIM Face a Surging Apple


Apple (AAPL) holds all of the aces right now. Its iPhone sales for the quarter that ended December 26 were double what is sold the same quarter a year ago — 8.7 million units. Just as important, it sold 3.36 million Macs, which should help pave the way for the new Apple tablet computer. The tablet is, after all, described as a flat screen cross between a PC and touchtone phone.

Apple has something critical that smartphone competitors like Palm (PALM) and RIM (RIMM) do not. Apple has a line of products with interconnecting hardware and operating systems. It has a huge developer environment that builds applications for its iPod and iPhone hardware. Apple has become the high-end brand for consumer electronics worldwide.

The sale of the tablet will be helped by iPhone and Mac sales because the tablet is an extension of the Apple brand, one of the most valuable and highly regarded in the world.  As tablet sales pick up, this should in turn help the sales of inter-connectible products which will almost certainly include the iPod, iPhone and Mac.

RIM and Palm present investors with special risks because they are essentially single product line companies. In RIM’s case, the Blackberry is still the device of choice among smartphones used by businesses and enterprises. The e-mail and web access capabilities of the Blackberry are popular with individual business subscribers, and the RIM mail server technology is equally popular with IT managers.

Palm does not even have the advantage of being a product that is highly regarded within any single sector of the smartphone market. It is an “also-ran” that investors hoped would do well with the introduction of its new Pre model. But, the enthusiasm for the product was short lived. It is not unusual to hear analysts who cover the wireless industry say that Palm needs to find a parent company to remain economically viable.

The Apple tablet launch could easily be viewed as an event that will have no impact outside the PC sector. That would be a mistake. Steve Jobs will almost certainly set up the new product to be part of the interactive ecosystem among Apple products, and that hurts the iPhone competition the day the tablet goes on sale.

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