Opinion: Apple buzz renewed on Wall Street
Market buzz around Apple Computer sounded again this week, as better news about chip companies helped break a losing streak on several exchanges.
The continuing runaway success of the iPod, improving Mac sales, and the planned move to Intel processors have helped fuel IT investor interest in Apple. While the Nasdaq Composite Index is about even with its year-ago level, Apple's share price is about 50 percent higher than it was at this time last year.
Tuesday, a day before the Nasdaq ended an eight-day losing streak, Apple basked in the glow of yet another analyst stock-rating upgrade. This one came from Needham and Co., which raised its rating on Apple stock from Hold to Buy. The move, according to Needham analyst Charlie Wolf, was sparked by a Harris Interactive survey that found, among other things, that as many as 8 percent of Windows users would move to a Mac that could run Windows.
Judging from survey results, Wolf calculated that Macs could take more than 5 percent of the global personal computer market by 2011, well above Apple's 1.8 percent sliver now -- and its share of the home market would be even greater.
A lot of excitement has been created by the idea of running Windows applications on Macs. Apple itself is allowing users to run Windows on Macs, through its Boot Camp software. And on Thursday a startup company called Parallels Inc. announced the release of Parallels Desktop virtualization software for Intel Macs, which enables them to simultaneously run Windows and Mac OS X. The 30-day introductory price is a low $49.99, and the full retail price will be only $79.99.
The Needham rating upgrade was the fourth upgrade from a major brokerage firm this year. On Tuesday Apple shares (AAPL) rose by $1.33 to close at $58.33.
Not all the news this week on Apple was good. On Wednesday, the U.S. International Trade Commission (ITC) said it will investigate a claim that Apple's iPod infringes a patent held by Creative Technology, the distant number two in the music player market. And recent reports about low pay and crowded conditions for Chinese workers who manufacture iPods have not done the company's image any good (on Wednesday the company issued a statement that it would investigate ).
The ITC announcement put a damper Wednesday on Apple shares, but on Thursday Apple bounced back, jumping up $1.77 to close at $59.38.
It seems that Apple is gaining from its decision to open up the proprietary Mac system while it is also securing its stronghold in the music market by adamantly keeping its iPod-iTunes system proprietary. The digital rights management scheme Apple uses prevents interoperability with other devices. But so far, the superior, seamless experiences users get from the music system has prevented a widespread outcry about its lack of interoperability.
No doubt Apple benefitted from Thursday's broader rally, but the company seems to be on a roll of its own.
After Goldman Sachs raised its rating on Intel Corp. (INTC) and the chip sector as a whole, several other brokerages followed suit Thursday. The Nasdaq index jumped 13.53 points Wednesday and went up again by 58.15 points Thursday to close at 2144.15. The chip stock upgrades and general confidence appeared to be due to a sense that chip and other tech stocks, after being hit by inflation fears and reports of slowing growth in IT, were a bargain.