Apple Looking Vulnerable

Apple Computer (NASD: AAPL) sits a couple of points away from an all time high.  They're growing fast, and they've got a lot of cash in the bank.  The company is over-loved by consumers and the media.  It all works out to good times for Apple Shareholders

But sentiment may be getting ready to turn.  The company recently lost an admittedly small case related to iPod battery replacement that'll cost them a few mil.  Financially it's no big deal, but why did they let themselves get into a lawsuit with their customers?

More importantly, serious tensions are emerging between the company and the record lables over their iTunes music store:

Two and a half years after the music business lined up behind the chief executive of  Apple, Steven P. Jobs, and hailed him and his iTunes music service for breathing life into music sales, the industry's allegiance to Mr. Jobs has eroded sharply.

Mr. Jobs is now girding for a showdown with at least two of the four major record companies over the price of songs on the iTunes service.

If he loses, the one-price model that iTunes has adopted - 99 cents to download any song - could be replaced with a more complex structure that prices songs by popularity. A hot new single, for example, could sell for $1.49, while a golden oldie could go for substantially less than 99 cents.

Music executives who support Mr. Jobs say the higher prices could backfire, sending iTunes' customers in search of songs on free, unauthorized file-swapping networks.

It's not even the price so much (I suspect) that keeps people using iTunes, but the safety and simplicity.  A commplex pricing structure would be terrible for the user experience, and could definitely push consumers back into the dark world of p2p.

Also disturbing is a growing chorus of consumers irritated with Apple products  (includng yours truly, but mainly since I can't run any of Google's neat software on them, and my Mozilla software freezes a lot).  Yesterday Om Malik announced he was switching back to the Panther Operating system from the newer-released Tiger.  A good friend has been in a battle with the company over a faulty iPod that has really soured her on the company.

So how does this disparate series of anecdotes affect AAPL?  Because at these valuations, so much of it depends on sentiment.  Any sign that that is being chipped away it, could cause investors to scurry.