What's Important in the Financial World (8/28/2012)

Isaac Shuts Gulf Coast Refineries

As Tropical Storm Isaac is forecast to turn into a Category 2 Hurricane before its makes landfall near New Orleans, it has caused large oil firms to shut many of their platforms in the Gulf of Mexico. This short-term reaction to the storm is not the most serious one for the U.S. economy. The more immediate problem is that refineries around the Gulf will be closed. Many of these are used to provide gasoline, so the amount of time they are off-line is critical. Gasoline futures have risen steadily over the past several days, and speculators believe that gas prices could rise by 10 cents a gallon in the short term. There is also a chance that some refineries many be damaged by Isaac, which could keep gasoline production down for some time.

The Future of Google’s Android OS

The primary concern about the future of mobile operating systems now that Apple Inc. (NASDAQ: AAPL) has defeated Samsung in a court battle over patents is that Google Inc. (NASDAQ: GOOG) will be Apple’s next target. If Apple does sue Google, and wins, the Android OS that powers most of the world’s smartphones would have an uncertain future. Must less visible is Microsoft Corp.’s (NASDAQ: MSFT) successful attempts to get hardware companies to pay royalties for Android — in some cases as high as $5 per unit. The Apple suit could embolden Microsoft to take action of its own against Google — one of its major competitors. Analysis about how the Apple win may help Microsoft has centered on the fact that the world’s largest software company and its smartphone hardware partner Nokia (NYSE: NOK) will have an easier time selling their products as Samsung retrenches. But Microsoft’s ability to assert that its mobile patents have been violated may be an even bigger win.

A Smaller iPad Coming?

Rumors continue that Apple will launch a mini-iPad. AllThingsD reported:

Only after the next-generation iPhone is out the door and on sale will Apple announce the smaller iPad it’s been working on. That device, which is expected to have a display of less than eight inches, will be uncrated at a second special event, which sources said is currently scheduled for October.

The conventional wisdom is that a smaller iPad will allow Apple to attack a portion of the market that is somewhere between its iPhone and full-sized iPad. Apple must think that middle spot has huge potential. But Apple will take a huge risk with a smaller iPad. This is that consumers may elect to buy it over the traditional iPad, which would cannibalize sales of the current product. Apple already has had a related problem with the launch of the iPhone 5. People who want the new phone have stopped purchasing the iPhone 4S, which has undermined Apple’s smartphone sales temporarily. Apple has been immune from damage to it sales due to the number of products it has in the market. That may not continue as that number multiplies.

Douglas A. McIntyre