Apple Valuation Tops $500 Billion as Company Readies IPad 3 Introduction

Posted on February 29, 2012 // 0 Comments

Apple

The Apple Inc. logo is displayed outside the company’s store in Hong Kong, China, on Thursday, Oct. 6, 2011. Photo: Jerome Favre/Bloomberg

Apple to Hold Event to Unveil New IPad on March 7

Feb. 28 (Bloomberg) — Apple Inc., the world’s most valuable company, will hold a product event on March 7 in San Francisco, where it’s said to be releasing the third generation of its best-selling iPad tablet computer.
The new device will sport a high-definition
display, run a faster processor and work with speedier wireless networks, people familiar with the product said last month. Cory Johnson reports on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

Apple Inc. (AAPL)’s market capitalization
topped $500 billion for the first time, cementing its lead as
the world’s most valuable business and reaching heights not seen
by any company since the last recession.

The shares gained 1.3 percent to $542.44 at 9:30 a.m. New
York time, bringing its market value to $505.8 billion. Apple
has risen 34 percent in 2012, following gains in each of the
past three years. The company is worth $93.4 billion more than
the world’s second-most-valuable business, Exxon Mobil Corp. (XOM)

Apple investors are anticipating a sales boost from the
company’s latest iPad tablet computer, due on March 7. They’re
also banking on a new iPhone coming by the third quarter and the
possibility of Apple offering a dividend, its first since 1995,
said Howard Ward, a money manager at Gamco Investors Inc. in
Rye, New York. Demand for Apple’s products has helped the
company increase profit faster than its stock price, making the
price-to-earnings ratio more favorable, he said.

“Impressively, its market cap has risen to the $500
billion level as its price-to-earnings multiple has actually
contracted,” said Ward, who helps oversee $36 billion in
assets. “At 12 times this year’s expectation of earnings, it
stands in stark contrast to the experience of Cisco Systems,
which sold at over 100 times earnings when it approached the
$500 billion level in 2000.”

Cisco’s Ascent

After trading near the half-trillion-dollar mark during the
dot-com era, Cisco Systems Inc. (CSCO) has tumbled to a market value of
$108.7 billion. The last U.S. company valued at $500 billion was
Exxon in April 2008, according to data compiled by Bloomberg.
The Irving, Texas-based energy producer now trades for $412.3
billion.

Under Steve Jobs, Apple transformed itself from an also-ran
in the personal-computer market to a leader in consumer
electronics, music sales and mobile devices. The Cupertino,
California-based company has maintained its growth since Jobs’s
death in October, reassuring investors that Apple can continue
updating products and pioneering new markets.

“What Apple has done is it gives you an indication of
where the markets are going,” said Mark Bronzo, who helps
manage about $24 billion at Security Global Investors in
Irvington, New York. “Their products tend to lead, and everyone
tends to follow.”

Apple posted net income last quarter of $13.1 billion, one
of the highest quarterly profits on record, putting it in the
same league as energy companies such as Exxon and Moscow-based
OAO Gazprom (OGZPY), data compiled by Bloomberg show. Per-share profit
of $13.87 for the period was more than Apple earned in any full
year before 2010. Sales rose 73 percent to $46.3 billion.

Sales Leader

The results also marked the first time revenue topped
Hewlett-Packard Co. (HPQ)’s, underscoring how Apple’s focus on sleek,
touch-screen mobile devices has rearranged the technology
industry’s pecking order. Net income, meanwhile, exceeded total
revenue at Google Inc., Apple’s largest rival in mobile
operating systems.

New Chief Executive Officer Tim Cook is pushing deeper into
China and adding carriers for the iPhone. Only 30 percent of the
world’s wireless-service providers now carry the device, giving
Apple room to grow, said Katy Huberty, an analyst at Morgan
Stanley in New York.

The risk is that carriers may refuse to continue paying big
subsidies to sell the iPhone, making it less attractive to
consumers, said Ed Zabitsky, an analyst at Toronto-based ACI
Research.

Going Apple’s Way

“A lot has gone in Apple’s favor the last few years,”
said Zabitsky, the lone analyst with a sell rating on the stock.
“There was great execution on their side, and poor execution by
its competitors.”

Apple plans to hold an event on March 7 in San Francisco,
where it’s expected to unveil the latest iPad. The new device
will sport a high-definition display, run a faster processor and
work with speedier wireless networks, people familiar with the
product said in January.

The company is counting on the new iPad to beat back
competition from newer devices running Google’s Android
software. Apple has sold more than 55 million iPads, generating
at least $34.5 billion in revenue.

The company also may use the March event to unveil an
updated Apple TV set-top box, which could stream higher-
resolution video to consumers’ televisions, according to Gene Munster, an analyst at Piper Jaffray Cos. in Minneapolis. Apple
is planning to release a full television set as early as the
December quarter, Munster said in a report, reiterating an
earlier prediction.

To contact the reporters on this story:
Adam Satariano in San Francisco at
asatariano1@bloomberg.net;
Peter Burrows in San Francisco at
pburrows@bloomberg.net

To contact the editor responsible for this story:
Tom Giles at tgiles5@bloomberg.net