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In the competitive world of tech, firms are increasingly looking to create ‘technology ecosystems’, where hardware is complemented by software and services. For the user, such integration can improve the overall experience, while the firms responsible hope to benefit from increased revenues and profits that can be derived from app, game or content sales. Much of the iPod’s early success, for example, can be attributed to its integration with iTunes, which made it easier than ever before to download and sync music, while Apple was revitalised by both sales of the product and subsequent music downloads.
With the potential for so much revenue to be generated via a single digital device – often for years after it is sold – it is hardly surprising that hardware is now at the forefront of the battle between major tech firms. Nor is it surprising that new product launches can have a dramatic effect on companies’ share prices. Investors are recognising that new products can have a pronounced effect on a company’s fortunes and will therefore often adjust their portfolios in response to announcements.
Our latest piece of research, Historical Stocks, pulls together some of the biggest product launches Apple, Amazon, Microsoft, Nintendo, Samsung and Sony have made in the past 25 years, showing how each product announcement affected the company’s share price over a seven-day ‘hype cycle’ – starting three days before the announcement and ending three days after. Here we explore some of the biggest lessons learnt from those launches, and how you can get the most out of your time on the markets:
1. Conduct thorough fundamental analysis
The key to understanding how to trade product launches via spread betting or CFDs is to recognise that each announcement is unique, and needs to be assessed carefully with thorough fundamental analysis. Such an analysis may take into account the size of the total addressable market, projected sales, potential ongoing revenue streams and the competitive landscape, among other factors, to determine how the markets will react.
When Apple launched the first iPhone in January 2007, for example, it was clear that the product represented a major leap forwards as the first ‘smartphone’. This, coupled with the fact competitors were still months away from launching smartphones of their own, drove Apple’s share price 10.5% higher over the course of the seven-day hype cycle.