Tripling of price brings 2-for-1 split in shares of Apple

Company credits demand for iPod music players

February 12, 2005|By BLOOMBERG NEWS

CUPERTINO, Calif. - Apple Computer Inc. said yesterday that it will split its stock 2-for-1 because its share price has more than tripled in the past year on surging demand for the company's iPod music player.

Apple last split its shares in 2000 at the height of the Internet bubble. Holders as of Feb. 18 will get an extra share for each one owned, and split-adjusted trading will start Feb. 28, Apple said.

Chief executive Steve Jobs has used the iPod to broaden the company's revenue beyond its Macintosh computers. The players make up 35 percent of total sales; shipments soared more than sevenfold last quarter. The iPod also spurred orders of other Apple products and helped make the stock the No. 2 performer in the Standard & Poor's 500 index last year.

"The average person is getting experience with Apple products, then they call their broker and say, `The iPod has changed my life,' and they buy the stock," said Eugene Munster, a Piper Jaffray Cos. analyst in Minneapolis who doesn't own the shares.

Apple shares rose $2.85, or 3.6 percent, to close at $81.21 yesterday on the Nasdaq stock market. Munster expects the stock to surge to $100 by November, not counting a split.

Sixteen analysts recommend that investors buy Apple shares, seven suggest holding the stock and none say to sell, according to Bloomberg data.

Customers for iPod include President Bush and Michael K. Powell, chairman of the Federal Communications Commission. Philadelphia Mayor John Street said he listens to his iPod every morning on his treadmill.

Apple's fivefold increase over the past two years marks a reversal from the 71 percent decline in 2000 and 35 percent drop in 2002, when the stock closed the year at $14.33. Apple's market capitalization has risen to $33 billion today from $5.14 billion at the end of 2002.

"Everybody hated it at $14, now they love it at $80," said John Buckingham, president of Al Frank Asset Management in Laguna Beach, Calif., which manages $625 million. Al Frank held Apple shares between 1997 and 2000, when the stock surged after the introduction of the iMac. "It's deja vu all over again."

The company benefited from rising demand for consumer electronics in the holiday shopping season. Sales of the iPod, Apple's fastest-growing product, surged to $1.21 billion in the most-recent quarter.

That success is spreading. Piper Jaffray conducted a survey of 200 iPod users in November that found 6 percent said they had switched to Apple's Macintosh personal computer from PCs for the first time since buying the iPod. Seven percent of those surveyed planned to switch to Mac from PC in the next year, Munster said this month.

Apple's 16 percent growth in U.S. PC shipments in 2004 was faster than the market's 11 percent.

Apple shipped 337,000 iMacs last quarter. That made the latest iteration of the consumer computer, released in September, the most popular Mac. Total Mac shipments rose to 1.05 million, the highest number of quarterly shipments in more than four years.

Last month, Jobs introduced his lowest-priced Macs and iPods to attract even more consumers and signed on new retailers such as Target Corp. to broaden distribution.

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