Ahead of the Bell: Analysts cheer iPhone update

Apple Inc.'s new iPhone operating system should help the company win a larger share of customers buying smart phones, analysts said.

Thomas Weisel analyst Doug Reid said Apple's presentation on the new features Tuesday left him "more confident that (Apple) remains well positioned to gain share in the smart phone market."

In a client note Tuesday, he estimated the Cupertino, Calif. company will capture 11.8 percent of that market this year, up from 7.7 percent in 2008. He kept an "Overweight" rating on shares.

Apple's new software will allow users to cut and paste text for the first time and offers new tools to third-party software makers, including the ability to create applications that have items for sale within them and access to customers' iTunes library of songs.

Needham & Co. analyst Charlie Wolf told clients in a note Wednesday that the new system shows "that Apple is not standing still but continues to build on its leadership in the smart phone operating system and application software market." He kept a "Strong Buy" rating on the shares.

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Wal-Mart will start selling iPhones by the end of the year, but it is unlikely that they will be available in time to take advantage of holiday sales.

Of more importance, perhaps, is that the phone may be sold for its lowest price yet—$99.

The rumors started circulating last week that a partnership between Wal-Mart (nyse: WMT - news - people ) and Apple (nasdaq: AAPL - news - people ) may be in the works, but Bloomberg confirmed today that employees at five California stores said that Wal-Mart will offer iPhones by the end of December, likely after Christmas.

Two of the representatives said the store will carry two models.

Bloomberg said analysts are suspecting that Apple may use the partnership to sell a discontinued 4-gigabyte version, which will allow it to hit what is considered a low price point for a smartphone.

Wal-Mart will be the second outside chain to be allowed to sell the device, following Best Buy (nyse: BBY - news - people ).

Currently, two models are for sale—an 8-gigabyte and 16-gigabyte version for $199 and $299.

What if, like Dr. Frankenstein, you could stitch together the best bits of your favorite games to create a guaranteed hit? What if you knew adding a few key components to a title would boost its sales exponentially or extend its shelf life? What if there was a recipe for designing a perfect game?

Those were the answers I sought when I asked Electronic Entertainment Design and Research ( to run an algorithmic regression on a mock game called "FutureNot" that I whipped up. But such a recipe does not exist, says EEDAR President Geoffrey Zatkin. Games can't be assembled like a Mr. Potato Head doll--swapping out eyes and ears until you find the most agreeable feature set. But if you look at the whole game, it is possible to project sales and determine whether it is worth including specific ingredients.

This is the sort of stuff the Carlsbad, Calif.-based research company does all the time for clients like Electronic Arts (nasdaq: ERTS - news - people ), Activision (nasdaq: ATVI - news - people ) and Ubisoft. Since 2006, the 20-person firm has been busy compiling sales data, classifying games and cataloging key components--everything from the art style to the gender of playable characters.

With its database of 6,000 games, EEDAR analysts can use historical and competitive data sets to project sales for upcoming releases. It can also determine how certain developers and publishers, marketing budgets and release dates align to affect game sales.

"Every game I have ever worked on, we've gone in blind as to which features would sell the game better," says Zatkin, who designed games for 11 years before co-founding EEDAR. Not knowing whether it would be worth an extra $500,000 to design a multiplayer mode "would scare the crap out of me," he says.

Only 4% of games that make it to market actually make a profit, he says. About 60% of a game's budget is spent reworking or redesigning a game. Armed with all this data, companies can make those tough calls early in the development process.

As for "FutureNot's" potential success, Zatkin analyzed it and says it's "a surprisingly decent game" that could sell 216,000 copies in six months. He notes that most developers won't make a blockbuster like "Halo 3," which has sold more than 3 million copies so far.