Apple Inc. (NDAQ: AAPL) shares fell sharply today amid increasing concerns that it will not meet its sales goal of 10 million iPhones this year. Meanwhile, reports also surfaced that a growing number of unlocked phones are being used on other carriers and hurting its revenue share with AT&T Inc. (NYSE: T). The new product only accounts for a small portion of the firm’s revenues this year, but analysts are predicting that it could account for upwards of a quarter of its revenues during the next four years. So, are these problems that Apple can overcome or are they in some serious trouble?

Apple is facing two large problems with its iPhones. First, there are reports of illegal shipments of exported iPhones returning to the United States and being sold for far less. It is believed that Apple generates approximately $100 per sale in the United States, but this development drops that number far lower. Secondly, there are an increasing number of unlocked iPhones that are causing the company to lose out on revenue from carrier partnerships. It is believed that Apple generates more than $200 in gross profit over the life of the phone through such arrangements. Reports have shown that over a million such unlocked iPhones have hit the market since the product was released.

The question shareholders have to ask is just how much the iPhone is worth to Apple. Shares began at around $85 per share when Steve Jobs first announced the new phone before dropping more than 40% of their value from their peak. This drop has many analysts believing that the stock is undervalued, especially given its strong free cash flow generation. Other suggest that negative news surrounding the iPhone and iPod will only make things worse before they get any better. And finally, there are some that are concerned about the rising cost of the iPhone as it could hurt sales of the legitimate copies while encouraging more consumers to seek illegal imports.

In the end, Apple shares will likely be volatile over the coming months as investors try and sort out the true impact that these events have on sales. It will be interesting to see if Apple decides to eventually drop its costs in order to encourage more buyers and take advantage of its lucrative carrier partnerships. Meanwhile, there seems to be no slowdown in unlocked iPhones. However, as the iPhone goes more mainstream, it will be consumed by less tech-savvy people that will be less likely to purchase and use an unlocked iPhone. Combined, these factors make AAPL a stock that is definitely worth watching over the coming months!

Related Companies
Microsoft Corporation (MSFT)
Dell Inc. (DELL)
Sun Microsystems, Inc. (JAVA)
Motorola, Inc. (MOT)
Palm, Inc. (PALM)
Hewlett-Packard Company (HPQ)
Silicon Graphics, Inc. (SGIC)
Lenovo Group Limited (LNVGY)
Netflix, Inc. (NFLX)
Sony Corporation (SNE)

Motorola Inc. (NYSE: MOT) shares are under pressure after few buyers appear to be interested in its handset business. The division has been on the auction block for three weeks and top vendors Nokia Corporation (NYSE: NOK), Samsung Electronics, and LG Electronics have all expressed zero interest. This has many investors concerned that the great Carl Icahn may have over-estimated the unit’s value. This has pushed the stock down below $11.50, a level not seen since Carl Icahn first took an interest in the company. So, is this a stock worth watching at these levels?

Motorola’s prospects may look bleak, but not everyone is convinced that the company is in trouble. Many long-term investors insist that one bad year on the design side doesn’t necessarily mean it is in serious trouble. Others believe that the company would still represent a great value for someone who wants to step into the wireless arena. And what about the lack of interest for the handset division? There are some that believe buyers are worried that the products may not be worth as much without the Motorola logo, which means that it is simply an “integration decision” rather than a “financial decision” not to buy.

Billionaire Carl Icahn also continues to count himself among the bulls on the stock. The activist investor insists that the handset division is worth $19 billion and needs to be separated in order to attract top management. This valuation is equal to the divisions sale’s last year and compares to Motorola’s total market value of $25.7 billion. The actual valuation of the unit can be debated. It produced one in every three cell phones within the U.S. market last year, but it did so with losses totalling $1.9 billion. Meanwhile, there are already signs that carriers are beginning to feature more phones from other competitors.

In the end, this is bad news for Motorola shareholders. A prolonged search process only further damages the prospects of the division as many more analysts are switching to a “sell” on the company. Shareholders can count Carl Icahn on their side, however, who may opt to take more drastic measures and call for a spin-off, private equity buyout, or other method to unlock the value in the unit. Regardless, this is definitely a stock that is worth watching over the next few months!

Related Companies
Nortel Networks Corporation (NT)
Nokia Corporation (NOK)
Research in Motion Limited (RIMM)
Cisco Systems, Inc. (CSCO)
Arris Group, Inc. (ARRS)
Apple Inc. (AAPL)
Microsoft Corporation (MSFT)
Alcatel-Lucent (ALU)
Powerwave Technologies, Inc. (PWAV)
QUALCOMM, Inc. (QCOM)

Financier Carl Icahn, now worth more than $14 billion, disclosed in a 13G filing today that he now owns slightly more than 5% of the manufacturer Keystone Consolidated Industries, Inc. (OTC: KYCN). Though the nature of the filing indicates Icahn only has a "passive" investment in the company, news of his position sent the stock up over 5%.

Keystone is "a manufacturer of steel fabricated wire products, welded wire reinforcement, coiled rebar, industrial wire and wire rod for the agricultural, industrial, construction, original equipment manufacturer and retail consumer markets" in the U.S. The company is small, with a market capitalization of only $100 million, and its reputation hasn't fully recovered from filing for bankruptcy protection in 2004.

On paper, Keystone has been performing quite well recently with $57 million in net income for 2006 on $440 million in revenue - the company has a P/E of only 1.5 as the stock is hovering around its 52-week low price.

The company does have $360 million in total liabilities that are anchoring its stock price, but Keystone seems to be taking serious steps to become more robust. It just recently announced a reduction in its salaried workforce as well as $25 million in additional shares available to existing shareholders, the proceeds of which will be used to reduce the balance of its expensive revolving credit line.

Icahn certainly has a stellar track record, and his vote of confidence in Keystone, like his confidence in J.C. Penny, definitely makes it worth watching closely.

Icahn's Portfolio
BEA Systems (BEAS)
Biogen (BIIB)
CSX Corp (CSX)
Imclone Systems (IMCL)
J.C. Penny (JCP)
Lear Corp (LEA)
Motorola (MOT)
Time Warner Cable (TWC)
Time Warner (TWX)
Williams Companies (WMB)