Apple Touches Record High As iPad 3 Sales Run Hot; Stock Hits $600

Apple's new iPad proved to be another hot-seller on Friday, with hundreds queueing at stores across Asia to be the first to get their hands on the 4G-ready tablet computer as the company's share price hit $600 for the first time.

As consumers lined up around city streets to buy the iPad, one firm that took the new device apart said Qualcomm, Broadcom, and Samsung Electronics had all held onto their prized roles as key parts suppliers.

David Tarasenko, a 34-year-old construction manager who was the first to pick up the iPad from a Telstra store at midnight in Sydney, said ever since Apple Chief Executive Tim Cook revealed the tablet's third iteration, he couldn't wait to get one.

"When Tim Cook announced it, it sounded like such a magical tool. I just got hyped into it, I guess," he said.

The new iPad is a progressive development of Apple's tablet, with a more powerful CPU and screen and better camera. It was not marketed as a revolutionary product like earlier versions, yet Apple devotees still snapped up the latest version.

"The iPad is already a pretty mature product and it's hard to revolutionise it any further," said Dickie Chang, an analyst with research firm IDC based in Hong Kong.

"It's slightly heavier than its predecessors and I think Asian consumers will be more concerned about that," he said.

"Going ahead, with Tim Cook at the helm now, I think he may have to come up with another product to mark his stamp. That could come in the form of launching a smaller iPad with a longer battery life, for instance."

Crowds were down on previous Apple launches, but there was still excitement as stores opened.

"I've come from Russia to buy an iPad for my three-year-old son David," Oleg Konovalov, a newspaper salesman, told Reuters in Tokyo. "Everyone in Russia wants an iPad, but to buy it there I will have to wait several months."

"This reminds me of the time 30 years ago when I waited 8 hours in the cold to see Lenin's Mausoleum."

The buzz helped propel Apple shares to record highs in US trade on Thursday, with Apple stock touching a high of $600.01 before easing back.

It peaked half an hour after the first iPad went on sale in Australia, extending the market worth of the world's most valuable company to almost $560 billion.

Only a month earlier, the stock price had crossed $500 for the first time. The stock has jumped 45 per cent this year.

At Thursday's closing price of $585.56, the stock is far more expensive than the $499 starting price for a Wi-Fi iPad.

Queues & Smugglers

The new iPad goes on sale on Friday in 10 countries, including the United States, Canada, Singapore, France and Britain, with diehards lining up overnight in front of Apple stores in Munich, Paris, London, Singapore and Hong Kong.

"After this, well, I'll first of all open it up and check it's as beautiful as I thought. Then I'll get some sleep," said Shintaro Aizawa, 16, who waited 15 hours outside a Tokyo store.

Just across the border from Hong Kong in the Chinese city of Shenzhen, people keen to get their hands on the new iPad had to wait for the tablet to be smuggled into mainland China.

"We don't have iPad 3s yet, but some will arrive later in the day when the students deliver them to us. We'll have more supplies over this weekend," said a store operator in Shenzhen.

"Customs has become stricter, but if you take one at a time across the border, that's still pretty safe. At most they'll ask you to take it out of the box to prove that it's for self use."

Wall Street expects a strong start for the latest iPad and some analysts even expect sales of the current model to overtake the iPad 2. Apple will continue to sell the iPad 2 but dropped its price by $100 to start at $399.

Apple may sell 65.6 million iPads, according to an estimate by Canaccord Genuity analysts who also raised their target price on Apple stock to $710 from $665. So far, the company has sold 55 million iPads since it was launched in 2010.

Tablet sales are expected to increase to 326 million by 2015 with Apple largely dominating the market, according to research firm Gartner. The iPad competes with Samsung Electronic's Galaxy and Motorola's Xyboard (MMI.N), among others.

Improvement Not Innovation

The third-generation iPad is seen more as a collection of incremental improvements, such as a high-definition "retina" display and a better camera, rather than a major innovation.

Online reviews of the new iPad overwhelimngly praised Apple for its improved screen resolution.

"My epiphany came when I placed my iPad 2 next to the new model, with the same text on the screen. Letters and words that had seemed sharp on the older model five minutes earlier suddenly looked fuzzier," said one online reviewer.

The inner workings of the iPad are similar to previous models, based on a "teardown" by a tinkerer from California gadget-repair firm iFixit, who queued up in Australia to get one of the new tablets and quickly took it apart for a Web blog.

iFixit cofounder Luke Soules' pre-dawn teardown at a Melbourne computer shop found Apple suppliers Qualcomm, Broadcom and Samsung had maintained their key roles in the newest iPad.

The iPad includes a Qualcomm LTE cellphone chip and a Qualcomm wireless modem for 3G and 4G. Broadcom supplies a semiconductor handling wireless tasks like WiFi and Bluetooth, according to iFixit.

The iPad's new A5X application processor, with improved graphics horsepower, is based on energy-efficient technology licensed from Britain's ARM Holding and is manufactured by Qualcomm, as in past Apple devices.

Supplying parts for Apple's iPhones and iPads, the industry's gold standards, is considered a coup for chipmakers and other manufacturers.

Analysts recommend caution in drawing conclusions from the teardowns because Cupertino, California-based Apple sometimes uses more than one supplier for a part. What is found in one iPad may not be found in others.

Still, teardowns remain a key source of information for investors interested in betting on Apple's suppliers, and the appearance of unexpected chips can move stocks.

"There are a whole lot of hedge funds out there that like to shoot first and ask questions later," said Alex Gauna, an analyst at JMP who covers technology stocks.

iFixit said the iPad's display appears to be from Samsung.

A NAND flash memory chip, used to store media like music and video, is supplied by Toshiba (6502.T). Japan's Elpida (6665.T) provides the DRAM chips.

The iPad teardown also revealed chips from Avago Technologies, Triquint Semiconductor (TQNT.O) and Fairchild (FCS.N).

Apple Stock Hits $600

As Apple's stock leaps to successive highs, it is intriguing to look back every couple of weeks just to see how far the tech giant has come.

Shares of the iPad and iPhone maker eclipsed the $600 barrier for the first time on Thursday, only about a month after first topping $500.

Just a day before Apple's new iPad becomes available in stores, the stock ticked up to $600.01 at Thursday's open before selling off. The new iPad, at a starting retail price of $499, costs less than one share of stock.

Apple Inc's rally has been stunning - the stock is up 47 per cent for the year and nearly 10 per cent for the month.

"There is buyers' panic out there. What kind of a right-minded person would buy this after looking at an Apple chart that has been basically up in a straight line?" said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania. Dailey owns put options in Apple as a hedging tool because the stock is "too hot to short."

Last month, Apple became only the sixth company in US history to top $500 billion in market capitalization, a significant move for a company whose stock traded at $10 about a decade ago. None of the others, which include Exxon Mobil and Microsoft, were able to sustain that market value over time.

"The frenzy gets compounded because Apple has become dominant in indexes. They need to have Apple in their portfolios, and they don't want to miss the train that is leaving the station," Dailey said.

Apple currently accounts for about 18.5 per cent of the Nasdaq 100 stock index. Its weighting was cut to 12.3 per cent from 20.5 per cent last April, but the price surge has pushed the stock's weighting back up, making this index of 100 well-known companies hostage to the performance of a few technology titans like Apple.

"The key thing for people to realize is that Apple has gone into a parabolic rally," said Alec Levine, associate director of equity derivatives at global brokerage firm Newedge SA in New York.

"Volatility will stay elevated in Apple until a consensus valuation for the stock is re-established."

Dailey compared Apple with tech stocks during the dot-com bubble and a sudden surge in silver prices last year, and said he expects a 15-20 per cent correction in Apple stock in the next couple of months, if not weeks.

Also on Thursday, the S&P 500 topped 1,400 for the first time since June 2008.

Earlier this week, Morgan Stanley and Canaccord Genuity both lifted their price targets on Apple to above $700.

Apple closed down 0.7 per cent at $585.56 per share on Thursday.

Volatility Ahead

One out of every five stock options trades in Wednesday's options market was in Apple, according to Henry Schwartz, president of options analytics firm Trade Alert. Options trading volume hit a record 2.11 million contracts on Wednesday, according to Trade Alert.

"It's also the greatest non-dividend single stock option volume seen since Citigroup was in the $4 pre-reverse split range in early 2011," Schwartz said.

Volatility in the stock has increased, judging by a VIX index that tracks Apple options. Didn't know Apple had its own VIX? It does - as do other blue-chip companies like IBM. Exchange operator CBOE Holdings Inc started Apple's VIX in January 2011.

The CBOE Apple VIX index .VXAPL, which measures the expected 30-day volatility of the underlying shares of Apple, jumped 13 per cent on Thursday to 42.06. The index is up 22 per cent for the month, suggesting more gyrations ahead as more investors speculate on short-term moves.

"What it shows is how crazy things have been getting recently in Apple," said Dan Nathan, a founder of RiskReversal.com.

The CBOE Apple VIX index works a lot like the CBOE Volatility index .VIX which generally moves inversely to the S&P 500 and is considered a gauge of investor fear. But while the VIX has declined dramatically to multi-year lows as the market makes new highs, Apple's volatility index has generally been rising in lock step with the stock price appreciation.

"Volatility going higher as a stock goes higher is not usual activity and tends to happen in bubble situations. Is Apple a one-man bubble?" Nathan said.

Dissected iPad Reveals Samsung, Qualcomm Parts

Apple's new iPad uses chips made by Qualcomm, Broadcom, Samsung Electronics and other semiconductor makers, according to a firm that cracked open one of the devices.

The newest iPad went on sale in Australia early on Friday, and at the front of a line of fans hoping to get hold of the 4G-ready tablet computer was a tinkerer from California gadget-repair firm iFixit, who quickly took one apart for a Web blog.

Supplying parts for Apple's iPhones and iPads, the industry's gold standards, is considered a coup for chipmakers and other manufacturers.

The iPad includes a Qualcomm LTE cellphone chip as well as a Qualcomm wireless modem for 3G and 4G. Broadcom supplies a semiconductor handling wireless tasks like WiFi and Bluetooth, according to iFixit.

Fueled by cans of carbonated caffeine drinks, iFixit cofounder Luke Soules' before-dawn teardown at a Melbourne computer shop found that Apple suppliers Qualcomm, Broadcom and Samsung have maintained their key roles in the newest iPad.

The iPad's new A5X application processor, with improved graphics horsepower, is based on energy-efficient technology licensed from Britain's ARM Holding and is manufactured by Qualcomm, as in past Apple devices.

Apple doesn't disclose which company makes the components that go into its smartphones, and insists its suppliers keep quiet.

Analysts recommend caution in drawing conclusions from the teardowns because Cupertino, California-based Apple sometimes uses more than one supplier for a part. What is found in one iPad may not be found in others.

Still, teardowns remain a key source of information for investors interested in betting on Apple's suppliers, and the appearance of unexpected chips can move stocks.

"There are a whole lot of hedge funds out there that like to shoot first and ask questions later," said Alex Gauna, an analyst at JMP who covers technology stocks.

The third-generation iPad from Apple - which sports a high-definition "retina" display and comes with a better camera - is capable of operating on high-speed 4G "LTE".

A source familiar with the device's components told Reuters this week that Samsung and LG Electronics will both supply their liquid crystal displays for the iPad.

iFixit said the iPad's display, removed using two bright orange suction cups, appears to be from Samsung.

A NAND flash memory chip, used to store media like music and video, is supplied by Toshiba. Japan's Elpida provides the DRAM chips.

The iPad teardown also revealed chips from Avago Technologies, Triquint Semiconductor and Fairchild.

One of the more widely followed teardown firms, iFixit is hired by a variety of clients who use its data for competitive intelligence, in patent disputes or to keep current on industry benchmarks.

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