The Bulls Keep Running for Apple

Despite choppy trading Tuesday with stocks showing little direction as a whole, prices of Apple (Nasdaq: AAPL) shares shot up US$8.04 to hit $264.92 before falling back to $260.80 by closing, gaining $3.92 for the day.

One reason for the strong showing could be reports that the iPad sold 2 million units in less than 60 days, beating even the iPhone, and that it's generally expected to continue selling strongly as it moves into new non-U.S. markets.

Another factor could be that Apple has overtaken Microsoft (Nasdaq: MSFT) as the big dog of high-tech companies.

Overall, analysts remain bullish on Cupertino despite reports of a United States Department of Justice probe into whether or not it bullied music labels out of participating in promos offered by its archrival in the online music biz, Amazon (Nasdaq: AMZN).

iPad Sales Copacetic, Stratospheric

Apple said this week that iPad sales hit the 2 million mark less than 60 days after its April 3 launch.

"Amazingly, in its first quarter of introduction, we believe the iPad family will easily exceed 10 percent of Apple's total revenue for the June 2010 quarter," wrote Brian Marshall, an analyst at Broadpoint Amtech. He pegged this at $1.6 billion out of the $14.6 billion he expects Cupertino to make in revenues for the quarter. "Recall it took the iPhone two quarters to achieve the same feat," Marshall pointed out.

"For calendar year, I assume the revenue for the iPad will be $6.2 billion," Marshall told MacNewsWorld." That will remain around the 10 percent mark of overall Apple sales.

In calendar year 2011, the iPad will make up 13 percent of Cupertino's total sales, bringing in $9.9 billion, Marshall predicted. These figures are conservative, he pointed out.

"Nobody's quite sure what the iPad sales figure will be for 2010," Laura DiDio, principal at ITIC, told MacNewsWorld. She has seen estimates ranging from 7.5 million to 15 million.

Look for Apple to bring out a new iPad model in the September/October timeframe, in time for holiday sales, and cut the price of the current model, DiDio predicted.

Who's Your High-Tech Daddy?

Apple last week overtook Microsoft to become the world's most valuable technology company, with a valuation of $222.12 billion against Microsoft's $219.18 billion.

On Tuesday, Apple's enterprise value was pegged at $210.59 billion at press time; Microsoft's was $194.92 billion.

Sure, both companies' overall valuations fell, but the important point here is the differential in their valuations. On May 26 the difference between both companies' values was about $3 billion; Tuesday it stood at more than $15 billion.

That giant sucking sound is Apple inhaling consumers' discretionary income to fatten its own (and its investors') wallets.

Playing Catch-Up is Hard to Do

While the strong demand for the iPad has sent Apple's competitors scurrying to bring out their own tablets, it now looks as if their chances of making inroads into this lucrative market are shrinking by the minute.

HP (NYSE: HPQ) has scrapped plans for its Windows 7 tablet and is now looking to leverage the webOS technology it obtained by agreeing to purchase Palm. A few other competitors have come up with tablets, most notably Asus, which just announced its Eee Pad Tuesday; however, their meals may consist of a large helping of Apple's dust for some time.

"As far as I can tell, the only thing that will hurt iPad sales is the limitations of the factories that make them," Carl Howe, director of anywhere research at the Yankee Group, told MacNewsWorld.

"Estimates are that these factories are producing a million iPads a month and may ramp that up to more than 2 million over the holidays," Howe said. "The only question is whether that will be enough to satisfy demand. Current indications are that it won't."

Flash or HTML 5?

One issue that may have impacted sales of the iPad is Apple's war with Adobe (Nasdaq: ADBE) over digital content. Adobe's Flash dominates in that market, but Apple and Microsoft have described that technology as dated and proprietary, and they are pushing HTML5 instead.

There is fear that perhaps enterprises with large amounts of digital content might not want to reformat their Flash content into H.264, the video codec supported by HTML5, because of the cost and difficulty of doing so.

"On most media asset programs, changing output type is just a matter of pushing a different button," the Yankee Group's Howe pointed out. "It's only existing assets that don't have source materials in a non-Flash form which really are a problem."

Despite its earlier resistance, Adobe appears to have capitulated to a certain degree -- on Tuesday, it unveiled a new digital publishing platform that was developed with the help of Wired Magazine. This supports the iPad.

Adobe will pursue a multiplatform development strategy but will continue to offer its Flash platform, company spokesperson Russell Brady said. It has to; media companies are not likely to tie themselves down to any one platform.

"Our goal is to make our content available to consumers on any platform using any technology," Keith Cocozza, spokesperson for Time Warner (NYSE: TWX), told MacNewsWorld. "In addition to using Flash, several of our companies have apps on the iPad today."

Time Warner was one of the companies reported to have declined to port its content to H.264 from Flash because of the expense and the difficulty of doing so.

That could translate to even more apps for the iPad and more sales of the device.

iPhone, iPhone Uber Alles

Despite the iPad's runaway success, the iPhone will remain the mainstay of Apple's business.

About 40 percent of AT&T's (NYSE: T) iPhone sales are to the enterprise, Ron Spears, CEO of the carrier's Business Solutions Unit, said at a conference hosted by Barclays Capital May 27.

"Despite the enormous success the iPad has enjoyed over its first 60 days, it is our view the international ramp of the iPhone remains the dominant driver of AAPL shares in calendar year 2010," Broadpoint Amtech's Marshall wrote.

He estimates 40 million iPhones will be sold in calendar 2010 and 50 million in calendar 2011. This year, international sales will account for 80 percent of those sales, up from about 60 percent in 2009.

"In our view, AAPL's business model continues to improve on a daily basis," Marshall wrote. "We continue to believe AAPL should be the largest position in any technology portfolio today."

Let him who hath eyes see, he who hath ears hear, and he who hath spare cash invest in AAPL.