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Apple (Nasdaq: AAPL) shares closed at US$259.69 Tuesday, up $5.41, or 2.13 percent, in volatile trading. While that number soars far above Apple's year-ago figure, it's almost ho-hum compared to what we've seen AAPL do earlier this year.
What's interesting about Apple's share price levels on Tuesday was that the overall U.S. market, led by technology and industrial stocks, was up -- the Dow, S&P 500 and Nasdaq each gained between 2 and 3 percent for the day. Taken in context, it makes one wonder whether perhaps Apple share prices are cooling off a tad, as they're following general market trends instead of leading them.
On the other hand, one might just see AAPL making yet another great leap forward once the iPhone 4 actually hits the streets -- pre-orders are flying in thick and fast, from the looks of things.
Meanwhile, the iPad is doing well overseas, which is going to be Apple's main market, and that's good news.
Presales on the iPhone 4 began Tuesday, and demand was high enough that customers complained about slow website performance from both AT&T (NYSE: T) and Apple at various times throughout the day. One of the iPhone 4's biggest competitors, the HTC Evo from Sprint (NYSE: S), also enjoyed brisk sales this month, but that phone's debut was somewhat marred by reports of technical problems with the device itself.
"We continue to believe Apple's valuation is very attractive and believe shares can benefit driven by strong iPad demand and a new iPhone upgrade cycle," Ben Reitzes, an analyst at Barclays Capital, wrote on Tuesday.
However, investors need to keep an eye on potential investigations of Apple by federal government agencies.
iPhone 4 Causes iChaos
Cupertino began taking pre-orders for the iPhone 4 on Tuesday, and the results were predictable to any seasoned Apple watcher. The flood of orders apparently is playing havoc with the company's own online ordering system, bringing it down intermittently.
Further, there have been reports that AT&T's own internal network has been clogged by the crush, while servers at Apple's Japan distributor Softbank are apparently struggling to keep up with the orders.
Meanwhile, people have reportedly been lining up at stores in Japan and the United States -- and this is merely to pre-order an iPhone 4, not to actually obtain one immediately.
"We expect very strong demand due to several new features like video chat," Barclays Capital's Reitzes wrote.
The iPad That Blooms in the Spring
Demand for the iPad is surging, especially in Asia, and not just among consumers looking for a new personal gadget. Some businesses see potential for the tablet computers as well. InterContinental Hotels is reportedly equipping concierges with iPads so they can respond to guests queries; Australian budget airline Jetstar plans to rent iPads to passengers as part of its in-flight entertainment offerings; and Ootsuka Pharmaceutical in Japan plans to equip its 1,300 sales representatives with iPads.
That strong acceptance is critical, as foreign sales account for more than half of Apple's revenue now.
In the United States, meanwhile, members of the White House inner circle are reported to be hooked on the device, and Salesforce.com (NYSE: CRM) has equipped its top executives with iPads, which it considers a critical business tool.
What about the breach at AT&T, in which hackers got hold of iPad owners' email addresses and identifying numbers for their devices? AT&T claimed the hackers can't do much beyond spamming the victims, but it now seems that attackers may also be able to learn the victims' names and phone numbers and track their locations, according to Ars Technica.
Meanwhile, sales for the iPad remain strong. "iPad demand continues to outpace supply," Barclays Capital's Reitzes wrote. He pointed out that the iPad is now being offered on Amazon.com (Nasdaq: AMZN) as a netbook. This shows the iPad is elbowing into the netbook market in the United States, Reitzes contends.
The Curse of Jobs?
While iPad sales soar and demand for the iPhone 4 builds, the HTC Evo, touted as one of the most advanced Android phones to hit the market yet, apparently had a bit of a stumble at the starting gate.
First, it turns out that Sprint reportedly overstated first-day sales of the device for its first few days on the market. It turns out actual sales were significantly less than what was claimed.
Granted, the carrier was following Apple's lead in not stating any figures, but there's a lesson to investors here: Any time a company is coy about providing statistics, even if it's your favorite company, think twice before accepting it as gospel.
When the Evo hit the market earlier this month, some users complained about technical bugs, which HTC promised to fix with an update. More lately, however, reports have surfaced that the Evo is having problems with its monster 4.3-inch screen. Some users say the screens on their Evos are separating from the bodies and popping off.
Money for Nothing and Your Clicks for Free
Another plus point for Apple is its entry into the mobile ad market. Recall that demand for mobile ad space on the iPad is strong and that Apple will launch its iAd mobile advertising network on iPhone and iPod touch devices running iOS 4.
Cupertino has already signed up major corporations, which have committed $60 million for the second half of 2010. Granted, that's partly because Apple is charging a digital arm and leg for its ads, but that hasn't kept it from scoring plenty of deals.
"The high CPM would be justified by advertisers with brand-building objectives, as the ads are promised to be more visual and compelling than standard mobile ad units, taking advantage of the visual elements that are unique to the iPhone and iPad," Shravan Goli, president of Dictionary.com, told MacNewsWorld.
CPM, or cost per mille, is the standard measure used in purchasing ads. It's the calculation of the cost of showing an ad to 1,000 viewers.
Expect Apple to take a bigger share of the mobile ad market, if other advertisers follow Dictionary.com's strategy.
"The iPhone has the lion's share of the mobile app market," Goli pointed out. "Being first to market with iPhone and iPad apps as well as being among the first group of publishers to be enabled for iAds establishes our brand as cutting-edge and gives us a leadership position in the mobile market. These Apple devices are still in market growth mode."
Singing the Federal Gub'mint Blues
However, Apple's tactics in battling Google (Nasdaq: GOOG) for the mobile ad market may get it into trouble.
Cupertino has banned third-party ad networks such as Google's AdMob from collecting performance data on ads on the iPhone and iPad. Predictably, that raised howls of anguish from AdMob, as these two devices accounted for 32 percent of the visits to AdMob's ad network in April.
This could lead to Google ramping up its own ad platform, but the bigger worry is federal probes into Apple's conduct.
Already, the FBI and the Federal Trade Commission are reportly considering launching investigations into Apple's conduct during its battle for the mobile ad market.
"As you come to dominate a market more and more, you have to be very careful to ensure that what you do to protect your own interests doesn't close the door to competition, or you'll run into the same problems IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT) ran into when they were investigated for stifling competition," Charles King, principal at Pund-IT, told MacNewsWorld.
"These investigations could permanently stain a company's reputation," King said.
For example, the antitrust investigation of Microsoft in the late 1990s has made it proceed "very cautiously, even timidly" in order to avoid a resumption of that probe, King pointed out.
"If Apple decides to be as combative as Microsoft was in the 1990s, it could be dogged by inquiries and the fallout from them for some time," King warned.
Keep an eye peeled for announcements from the FBI and FTC.
