Apple Market Value Soars Past Dell's on Mac, IPod

Ten years ago this month, Dell Inc. founder Michael Dell said Steve Jobs should shut down Apple Inc. and return the money to shareholders.

Dell then had a market value of $4 billion to Apple's $700 million. Apple's valuation has since soared to $150 billion, more than double that of its personal-computer rival. Last month, Apple passed PC leader Hewlett-Packard Co. in market capitalization for the first time.

Jobs changed Apple from a company dependent on the Macintosh computer to a consumer-electronics innovator. He introduced the iPod media player, and built sales to more than 110 million units by updating features. This year Apple entered the wireless-handset market, drawing more than 1 million customers to the iPhone at an initial price of as much as $599.

It's not a one-trick pony anymore, said Jeffrey Krumpelman, portfolio manager at Fifth Third Asset Management in Cincinnati. It really is a cash-flow machine. He helps oversee $21 billion in assets, including Apple shares.

Jobs, who returned for a second stint as chief executive officer in 1997 after being away for a dozen years, may say annual sales surpassed $20 billion for the first time in the company's 31-year history when he reports results for the year and fourth quarter on Oct. 22.

Record Share Price

The Cupertino, California-based company's profit for the year probably topped $3 billion, according to the average estimate of 11 analysts surveyed by Bloomberg.

Sales for the quarter ended Sept. 29 may have jumped 24 percent to $6.01 billion, fueled by back-to-school demand, the survey found. Profit may have climbed to 84 cents a share from 62 cents in the year-earlier quarter.

Apple's shares fell $3.08 to $170.42 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has more than doubled this year. Twenty-five analysts monitored by Bloomberg recommend buying the stock, and four say hold.

The company plans to give new sales figures for the iPhone, which features a built-in iPod and Web-surfing functions. As of Sept. 9, Apple and U.S. partner AT&T Inc. sold 1 million phones. The device, introduced June 29, was AT&T's best-selling handset in the third quarter, Boston-based researcher Strategy Analytics said yesterday.

Apple's Cut

Jobs reduced the iPhone's price last month by $200 to $399 to spur holiday sales and reach his goal of selling 10 million handsets in 2008.

The lower price probably worked, said Piper Jaffray & Co. analyst Gene Munster in Minneapolis. He estimates Apple sold 1.05 million iPhones last quarter, topping Jobs's July forecast of 730,000 units.

Apple also will disclose for the first time its share of the $60 to $220 monthly in fees AT&T receives for providing iPhone service. The San Antonio-based company has an exclusive agreement to sell a two-year contract to U.S. customers.

Analysts' estimates of Apple's commission range from $6 to $15 per subscriber a month. A 10 percent share of the 24-month contract would give Apple about $10.6 million in revenue since the device went on sale, Munster said.

Sales will get a boost in November, when carriers in the U.K., Germany and France start selling the phone.

This party is just getting started, said Stephen Coleman, chief investment officer at St. Louis-based Daedalus Capital, which began buying Apple shares in 2004 and owns about $4 million worth. My clients smile a lot. So do I.

IPod Success

Apple's iPod sales continue to grow six years after the player was introduced, helped by upgrades such as support for videos and photos. Jobs continued that strategy in September, when he revamped the line and added the iPod Touch video player, which uses the same 3.5-inch color touch screen as the iPhone.

The enhancements are enticing current iPod owners to buy new models, said Credit Suisse analyst Robert Semple in New York. The company sold 10.4 million to 13 million iPods in the fourth quarter, according to five analysts surveyed by Bloomberg.

The iPod accounts for 70 percent of media-player sales in the U.S., while its closest rival SanDisk Corp. has 10 percent, according to the research firm NPD Group Inc. in Port Washington, New York.

Microsoft Corp.'s Zune player, introduced last year and refashioned earlier this month, is unlikely to crack the iPod's dominance, said Michael Gartenberg, an analyst with JupiterResearch in New York. The iPod provides form and function that resonate with consumers, he said.

Winning Customers

Updated versions of the Mac, with faster chips from Intel Corp., also are winning customers. Mac shipments have topped 1 million units for 11 straight quarters. Analysts estimate a record 2 million machines were shipped last quarter.

Apple's PC market share in the U.S. widened to 8.1 percent from 6.2 percent in the third quarter, Gartner Inc. reported this week. Mac shipments rose 37 percent, with Apple posting the fastest growth among the top five PC makers, the Stamford, Connecticut-based researcher said.

At Round Rock, Texas-based Dell, which lost the PC market lead to Hewlett-Packard last year, shipments fell 5.5 percent.

Source - Bloomberg