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

Oracle Offers to Buy BEA Systems for $6.7 Billion

Oracle Corp., the third-largest software company, made a hostile $6.7 billion bid to buy BEA Systems Inc., sending shares of the business-program maker above the offer price on speculation rival suitors will emerge.

BEA stock jumped as much as 36 percent to $18.56, topping the $17-a-share cash bid. Oracle's proposal is 25 percent more than yesterday's closing price as Chief Executive Officer Larry Ellison pursues growth through acquisitions. BEA rejected the offer, saying it ``significantly'' undervalued the company.

Ellison's interest may draw International Business Machines Corp. or SAP AG into the contest, analysts said. Billionaire shareholder activist Carl Icahn last month started to push BEA to sell, and a deal would bolster Oracle's efforts to compete with IBM in so-called middleware software that connects servers with databases and programs that manage Internet transactions.

``This is too much of a crown jewel to let go without a fight,'' said Ray Wang, a Forrester Research Inc. analyst in Foster City, California. ``There are a number of vendors, including SAP, IBM and H-P, that need BEA more than Oracle does. It's definitely not over.''

Hewlett-Packard may be able to pay $25 a share, RBC Capital Markets analyst Thomas Curlin said. Before today, BEA shares had gained 15 percent in Nasdaq Stock Market trading since Icahn announced his stake in August. Oracle rose 10 cents to $22.56.

SAP spokesman Frank Hartmann, Hewlett-Packard's Emma McCulloch and IBM's James Sciales declined to comment. Oracle's Bob Wynne didn't return a call seeking comment.

Serious Proposal

If he succeeds, Ellison's 35 takeovers will total more than $31 billion in three years. Oracle said it has had ``repeated'' conversations with BEA management over the past several years and delivered the proposal to its rival's board Oct. 9.

The purchase, which would be its biggest since PeopleSoft Inc. in 2005, would give Redwood City, California-based Oracle lucrative maintenance fees. BEA once dominated the market for programs that deliver applications over the Web.

While new software sales slipped and it now trails IBM in that market, BEA still brings in support fees that totaled $714.9 million in the four quarters ended July 31.

``We have made a serious proposal including a substantial premium for BEA,'' Oracle President Charles Phillips said in a statement today. ``We look forward to completing a friendly transaction as soon as possible.''

BEA can't consider any long, ``open-ended'' process because it competes with Oracle and that could damage its business and stock price, according to a letter to Phillips dated yesterday that BEA released with its statement today.

Icahn's Efforts

Icahn, who owns 13.2 percent of BEA and is now the largest shareholder, is pushing the company to seek a buyer whose larger sales organization may spur revenue growth. BEA's software license sales fell 9 percent last quarter.

He told CNBC today that BEA is still ``undervalued'' and that he wants other bidders. BEA would be ``great'' for four or five companies, including Hewlett-Packard and IBM, he said.

Icahn said last month he planned to meet with other investors and may nominate his own board candidates. BEA, which is restating results from 1998 through the first quarter of 2007, can't hold a shareholders meeting until its filings are current.

Forcing It

Oracle, which trails Microsoft Corp. and IBM in software sales, would be paying more than seven times next year's maintenance revenue, valuing BEA at more than what Oracle paid for PeopleSoft and Siebel Systems Inc., said Chris Hickey, an analyst at Atlantic Equities in London.

``It shows they want to get this deal done and want to force BEA's hands,'' he said. UBS AG's Heather Bellini in New York, the top-ranked software analyst by to Institutional Investor, had estimated BEA may fetch as much as $16 a share.

Bloomberg calculated the total value of the deal based on 392 million BEA shares outstanding as of May 2006 because BEA hasn't issued updated figures while it works to restate results.

BEA said this week its restatement will cut profit by $425 million before taxes, exceeding its earlier estimate. The company is correcting results to account for misdated options grants and severance contracts, which hid some costs.

Buying BEA would help Oracle undermine IBM in the middleware market, said Peter Kuper, a Morgan Stanley analyst in Boston.

``With BEA, Oracle eventually could offer a wider variety of products that work together, potentially at a significant discount,'' he said. ``IBM has the most to lose.''

Oracle's offer comes after SAP this week agreed to buy Business Objects SA for 4.8 billion euros ($6.7 billion). SAP, the No. 4 software seller and the leader in business-management programs, gains software that tracks corporate databases.

An Oracle-BEA combination may prompt some BEA customers to switch to Oracle from Walldorf, Germany-based SAP, said Richard Williams at Summit Analytic Partners LLC in Summit, New Jersey. That may draw a rival offer from SAP.

``A week ago I would have said that SAP wouldn't make that big an acquisition,'' he said. ``But since they bought Business Objects, you have to think that maybe they will.''

Source - Bloomberg