Apple’s value skyrockets as iPhone 5 buzz grows

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Apple’s value skyrockets as iPhone 5 buzz grows

Apple set a U.S. record for market value, surpassing the high mark reached by Microsoft during the Internet heyday, on optimism the next version of the iPhone will meet high demand.

Apple shares rose 2.6 percent to $665.15 at the close in New York, for a market value of $623.5 billion. That overtook Microsoft’s $616.3 billion closing market capitalization on Dec. 27, 1999, according to data compiled by S&P Dow Jones Indices.

Apple is preparing to introduce the next version of the iPhone on Sept. 12 in what will be a design overhaul of its top-selling product, two people with knowledge of the company’s plans said last month. The next iPhone “could be the most impactful product upgrade in Apple’s history” and the company will probably sell as many as 250 million units over the life of the device, according to analysts at FBR Capital Markets.

“With the iPhone they have successfully created a strong customer following in an absolutely enormous marketplace,” said Toni Sacconaghi, an analyst with Sanford C. Bernstein & Company, in an interview. “They have captured the hearts and minds of consumers.”

Apple gets about 70 percent of its profit from the iPhone, Sacconaghi said. The company’s stock has risen an average of 11 percent in the two months before previous iPhone updates have been released, he said.

The new iPhone will have a larger screen and thinner body, and is expected to work with faster, long-term evolution (LTE) wireless networks being introduced by U.S. carriers such as Verizon Wireless and AT&T, according to analysts including Piper Jaffray’s Gene Munster.

Smaller iPad

In addition to the iPhone, Apple also plans to introduce a smaller, cheaper iPad by the end of this year, people familiar with the plans said last month.

Apple, already the world’s most valuable company, has surged more than sevenfold since the iPhone debuted in January 2007. The stock has climbed 64 percent this year.

Because Microsoft’s record was set during the Internet boom when valuations were inflated by predictions that later failed to materialize, a more significant long-term milestone would be if Apple’s market value tops $1 trillion, David Yoffie, a Harvard Business School professor who has written about Apple, said in an interview.

“We’re in a period now of much more normalcy, which makes Apple’s accomplishments even more impressive,” Yoffie said.



‘Easily justified’

While the popularity of the iPhone and iPad make it possible that Apple might surpass that $1 trillion mark, it can be difficult for technology companies to maintain a run of the kinds of successes that Apple has had over the past decade, he said.

“It doesn’t take much to miss a cycle,” Yoffie said. “Right now this valuation is premised on iPhone 5 and a new smaller iPad coming out and if these are very good or great products then the valuation will be easily justified. If for any reason they have a hiccup on any of these products, then Apple would be vulnerable.”

PetroChina became the world’s first company to be valued at $1 trillion when the shares almost tripled on its first day of trading in Shanghai in 2007.
Bloomberg

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