Apple shares slide in wake of iPad launch

Apple shares were down 4 percent at $199.62 on Thursday afternoon on the Nasdaq. The company's stock often sells off following major product announcements. Separately, Nokia Oyj said it gained share in the smartphone market, while analysts said Apple's iPhone lost some ground against its competitors. The iPad is a thin and light, 9.7-inch touchscreen device good for Web browsing, video, games and electronic books. Chief Executive Steve Jobs formally introduced the product at a high-profile media event on Wednesday after months of rumors that helped propel Apple's shares to an all-time high earlier in January. The device will start at $499, a price point much lower than expected and which was well-received by analysts. But Apple is positioning the iPad as a "third category" device -- somewhere between laptops and smartphones -- and demand is still uncertain. "On balance, we view the iPad as a modest disappointment relative to expectations/rumors around features, although the relatively low entry level price was an upside surprise," Sanford Bernstein analyst Toni Sacconaghi wrote in a research note. He said Apple could sell 5 million units in the first year, with a potential earnings-per-share contribution of 28 cents. He said the device will be most attractive to consumers interested in netbooks and electronic readers, and does not expect it to cannibalize Apple's Macbook laptops. Analysts also pointed out that the iPad does not support Adobe Systems Inc's widely used Flash format, so there may be compatibility issues with certain websites, and that it does not have a camera. Barclays Capital analyst Ben Reitzes said Apple's product announcement came in largely as expected. "However, the pricing is much more attractive than expected and clearly shows that Apple desires mass market appeal," he wrote in a note. Reitzes estimated Apple will ship 2.9 million units in fiscal 2010 and 7.3 million in fiscal 2011. He raised his price target to $285 from $265. Oppenheimer & Co analyst Yair Reiner issued a more modest sales forecast of 1.1 million units in fiscal 2010 and 4 million in 2011. Reiner also took his price target to $265 from $255. "It won't happen overnight, but in time, we believe that what looks today like a big iPhone or an amputated netbook or a souped-up photo frame will be revealed as a revolutionary new media device," Reiner wrote.

Apple Profit Surges on iPhone Sales

Apple Inc. continued to power through the recession as it posted a 47% quarterly profit jump as consumers continued to snap up its iPhones and Macintosh computers. The company also sounded an upbeat note for the holiday season, despite new competition in the smart-phone and PC markets. Shares of Apple surged more than 6% after the results were released, eclipsing $200. Apple sold 7.4 million iPhones in the quarter ended Sept. 26, up 7% from a year ago and 41% more than the previous quarter, bucking concerns of a supply constraint. Demand was fed by a price drop and a faster iPhone model announced in June, which it has been gradually rolling out in overseas markets. "We feel very, very good about suiting up and competing against anyone," Tim Cook, Apple's operating chief, said on a conference call. "Frankly, I think that people are really just trying to catch up with the first iPhone that was announced two years ago, and we've long since moved beyond that." Apple also sold 3.1 million Macintosh computers in the quarter, up 17% from a year earlier, as it continued to gain ground on Windows-based machines. In the quarter, Apple released Snow Leopard, a major upgrade to its Mac operating system, and it said initial sales have been double that of the previous upgrade two years ago. Microsoft Corp. will release a new version of its rival software, Windows 7, this week. While Wall Street had feared that expectations for Apple's earnings could be too high, the results exceeded even the most optimistic expectations. "I'm shocked," said Kaufman Brothers analyst Shaw Wu. Overall, Apple reported a fiscal fourth-quarter profit of $1.67 billion, or $1.82 a share, compared with $1.14 billion, or $1.26 a share, a year earlier. Its gross profit margin rose to 36.6% from 34.7% a year ago. Revenue increased 24% to $9.87 billion from $7.9 billion a year earlier. Apple's strong results appear to indicate that overall consumer spending is recovering. Other technology companies have also recently posted positive earnings, including Intel Corp. and Google Inc. "This quarter really signals that we're coming out of the trough," said Gene Munster, an analyst for Piper Jaffray. "You don't see too many blow-out quarters like that, especially when you're the size of Apple." Apple's shares, which have nearly doubled over the past year, rose 6.1% to $201.50 in late trading, after closing up about 1% at $189.86 on the Nasdaq Stock Market. For the current quarter, Apple's forecast for earnings and profit were less conservative than in the past. The company projected per-share earnings of about $1.70 to $1.78 with revenue between $11.3 billion to $11.6 billion.