Filed under: Apple Financial

The early adopters are out in force today. Based on analysis from Fortune's Apple 2.0 blog & the investors of the AAPL board on Investor Village, it seems that as many as 50,000 iPads were pre-ordered in its first two hours of availability this morning. That's pretty staggering demand, especially considering that on a typical day Apple only receives an average of 15,000 online orders for all products combined.

Naturally, we have no way of knowing if these numbers are exact as of yet. The numbers reflect over 50,000 orders placed in two hours, and the percentage of those that are iPad orders isn't clear. Considering that the iPad was just made available for pre-order today, however, and the 15K daily average noted above, it's likely the majority of orders placed this morning were indeed for the iPad. Additionally, the numbers only reflect the number of orders placed, not the number of units ordered; taken with the 2-pad maximum for today's pre-orders, the data does suggest that somewhere in the neighborhood of 50,000 iPad pre-orders were placed within two hours of its availability.

This suggests a huge demand for the device, at least among early adopters. It will be very interesting to see if this trend is repeated once the iPad is actually available in stores.

One interesting note: even if all 50,000 of those iPads were the $499 version (which is very unlikely), based on iSuppli's analysis of that unit's build cost, it means Apple gained nearly $13.5 million in revenue profit from the iPad alone in a mere two hours -- and that's the bare minimum. Once you factor in all the other models and their higher prices, the numbers climb by several million dollars. Even for a company with a market cap in excess of $205 billion, that's still pretty amazing performance.

[h/t MacRumors]

At long last, Apple and China Unicom Ltd. are working to introduce Wi-Fi-enabled iPhones to China.

The iPhone has failed to thrive in China, due in part to an active black market and the Golden Shield Project (GSP), which censors certain Internet content. To comply with the GSP, devices that include wireless Internet have been required to use China's own WAPI standard. Meeting that requirement forced Apple to re-design the iPhone for China.

In the meantime, a change in policy permitted devices to have both WAPI and Wi-Fi, but by then it was too late, and the 1st round of re-designed iPhones were released in China without Wi-Fi.

Now, Unicom Chief Executive Chang Xiaobing says that iPhones with Wi-Fi will be made available to his company's customers. He didn't announce when that will happen, but did suggest that existing customers (without Wi-Fi) will be compensated, perhaps with expanded use of Unicom's high-speed 3G network.

Unfortunately, this probably won't send iPhone sales soaring. There's still a powerful black market to contend with and less expensive iPhones in Hong Kong.

[Via Silicon Alley Insider]

Apple's announcement earlier today of an on-sale date and presales for the iPad seems to have struck a major chord with investors. Never mind the fact that April 3 only equals "late March" for unusually large values of March; when it comes to magical & revolutionary, Wall Street votes "yes, please" with a record intraday high for AAPL. The stock hit $219.70 at 1:14pm this afternoon, and is on track to remain above yesterday's close of $210.71.

Apple investors who bought in 5 years ago, when the stock traded around $40 -- or even those who sought a bargain in January 2009, and picked up some shares in the mid-$80s -- are undoubtedly delighted. Just in today's trading, Apple's market capitalization is up over $7.5 billion dollars, at around $198B total; compare to Google's 138B$180B, HP's $123B, and IBM's $165B. Not too shabby.

Update: Closed at $219. Jim Cramer's "Stop Trading! " segment included his philosophy of trading AAPL, which suggests a buy and hold now, dump right before April 3, then buy back in during the inevitable backlash against the iPad when the press says it's not deserving of the hype, "because they will be wrong."

[h/t Silicon Alley Insider]

Note: I hold a small, long-term position in AAPL.

Amazon has used low-priced, exclusive "Daily Deals" to promote its MP3 store successfully, and Apple's not happy about it. In fact, the iTunes team is trying to talk publishers out of participating.

According to Billboard, participating labels entered into the program with Amazon in 2008 without paying a thing. It was simply meant to increase the store's publicity. Two years later, that's changed. An unnamed major-label head of sales told Billboard that "[the] promotion morphed into something where the labels make arrangements to provide an exclusive selling window with Amazon for a big release expected to do a lot of business on street date [the day the new release is available for general retail sales]."

Two years in, the labels are motivated to offer Amazon first dibs on major releases at a significant discount, and that's gotten Apple's attention. Billboard's sources suggest that iTunes executives are trying to persuade labels to stop offering Amazon these exclusives, and have even gone so far as to pull their own promotions for those releases.

In response, Billboard reports, certain label executives recently opted out of Daily Deal promotions for such big names as Corinne Bailey Rae, Lady Antebellum and Ke$ha (Sony Music Entertainment denies considering a Daily Deal promotion for Ke$ha's "Animal"). Additionally, Amazon is said to be altering the deal to not require exclusivity, but Apple's still unsatisfied.

Oh what a tangled web we weave, when first we practice to sell digital music.

[Via AppleInsider]

Bernstein Research's Toni Sacconaghi issued a 13-page report last week in which he estimated that the iPhone's gross profit margins were an astounding 57.8%. Those margins tower above Apple's competitors with RIM estimated to have 43% profit margins, Nokia 33%, Motorola 32%, and HTC 31.7%.

Sacconaghi believes that the iPhone's high gross margins could change Apple's business model as the iPhone's share of Apple's overall revenue stream grows from 30% in FY09 to an estimated 45% to 50% in FY11.

Philip Elmer-DeWitt over at Apple 2.0 notes that while the Street generally assumes Apple's profit margins will decline over the next few years, Sacconaghi believes they will increase due to a few key points:

• iPhone prices are actually increasing. In Q3 2009, the average wholesale price was $588. In Q1 2010 it's risen to $638.
• Buyers are still more than eager for the iPhone. There is no sign of price resistance from either customers or carriers. Mobile partners are still lining up to get the iPhone with Apple adding 15 new ones over the past 4 months.

Despite his Rosy outlook, Sacconaghi is reducing his iPhone shipment estimates by 1.3 million units in FQ4 10 and 5.5 million units in fiscal year 2011 under the assumption that there won't be an iPhone for Verizon before mid 2011. He also expects T-Mobile will get the iPhone before Verizon does. As for the iPad, Sacconaghi estimates its gross profit margins to be between 30 to 32%, not the 50% suggested by iSuppli.

Sacconaghi rates AAPL as "Outperform" and has a price target of $250. In his report he states, "We believe that on a cash flow basis the stock is very attractively valued and that the stock is the most attractive secular name in our coverage universe."

Last week in this post and last night during the talkcast, we mentioned that Apple's shareholders had passed on a sustainability proposal during last week's meeting (the first time in recent memory that Apple didn't go for stricter environmental standards), but apparently the shareholders weren't just against the proposal. At least one of them was openly heckling Al Gore about his work with the environment. Shelton Ehrlich (who apparently has a reputation among Apple shareholders as a conspiracy believer) stood up and called Gore a "laughingstock," railing against Gore's re-election to the board of directors. Good times -- we're sure Gore is used to dealing with controversies like that, but we wouldn't have expected it at the Apple shareholder meeting.

Still, that hasn't dissuaded him from working with the company -- according to an SEC filing, he also picked up another 10,000 stock options from Apple, netting him more than $227k according to Apple's current stock price. Good deal. At least one of Apple's shareholders isn't too happy with Gore's work for the environment, but the relationship between Gore and Apple seems like it's here to stay for a while.

Thursday, Briefings.com, CNBC and a passel of other market analysts predicted that a 4 for 1 stock split would be announced at the Apple Shareholder Meeting. This rumor moved the market, but there are conflicting opinions to why. First, for the uninitiated, a stock split is a zero sum game. One interpretation is that a firm considers its stock too highly priced for the average consumer and decides to split. For example, let's say that Apple is trading for $200 and you have one share. If a 4 for 1 stock split takes place, you will wind up 4 shares, instead of 1, but each share will be valued at $50. Did you gain or lose any money? No. It's all on paper. However, to those not familiar with the Buttonwood tree, and that's a lot of us, it sounds like 'quick buy Apple and you'll be getting 4 times as much'. The case for this sort of stupidity is well made by Barrons.

Stock splits are nothing new to AAPL. They've split 2 for 1 three time in the past, in June 1987, June 2000 and February 2005.

There are two general schools of thought on the reason behind stock splits, and they are total opposites. The first theory is that a company will split a stock if it is in trouble to allow lower dollar investors to buy their shares at half the price and thus incur less risk. The other school of thought is that a good company realizes their stock is just too expensive for the small trader who has some cash on the sidelines. It is meant to give the small guy an easier way to buy some stock without needing to commit the $200 for a share. Both sides have their points and, to an extent, both points are based on smoke and mirrors since they do not effect the worth of the company or the aggregate value of the stock by one penny.

Just yesterday Apple's iTunes store reached a huge milestone -- 10 billion songs sold. That's an incredible number. In fact, it's almost as incredible as the prize that Mr. Louie Sulcer of Woodstock, Georgia received for buying the magic song. As his reward, he received a $10,000 iTunes gift card, which he may use towards any of the music, TV shows, movies, apps, books, etc. in the store.

What was the 10 billionth song downloaded? "Guess Things Happen That Way" by Johnny Cash.

Apple's vice president of Internet Services Eddy Cue remarked on the milestone in a recent press release. "We're proud that iTunes has become the number one music retailer in the world, and selling 10 billion songs is truly staggering."

Congratulations to Mr. Sulcer! Enjoy that hefty gift card. Might we suggest a little Battlestar Galactica [iTunes link]?

[Via MacDailyNews]

Apple had a great holiday sales quarter in the US and now research firm Gartner is reporting similar good news from Europe. Specifically, Apple shipped 182,000 machines in the fourth quarter of 2009, giving it a 5.5 percent total market share in France. It should be noted that Apple didn't reach the top five in any other European country.

Overall PC sales declined throughout Europe in 2009, while Mac sales in the U.K. increased from 3.8 percent in 3Q 2008 to 5 percent in 3Q 2009. Gartner attributed the increase partly to the "halo effect." That's the common term for increased sales of Macs from PC owners who have purchased iPods or iPhones and find that they love the design and ease of use of the Apple devices.

The only manufacturer to out-perform Apple's growth in Europe during 2009 was Acer, which saw 35.5 percent growth.

Currently there are two Apple retail stores in France: Apple Store Odysseum in Montpellier and Apple Store Carrousel du Louvre in Paris.

Apple has expanded its trademark on "iPhone" with the inclusion of the US Patent and Trade Office's (USPTO) "category 28," which reads as "handheld unit for playing electronic games." Other USPTO categories included in the trademark are number 9 (mobile phone and digital audio player) and number 38 (electronic data-transmitting device). Note that Apple filed to include category 28 way back in December of 2007, so don't take it as a sign that the next gen iPhone will be a gaming monster.

This news is no great shakes, but an example of Apple covering its bases. For example, back in 2002, Apple applied to register the iPhone trademark in China, but that application was limited to computer hardware and software, not mobile phones. Earlier this year, Apple took control of the "i-phone" trademark in China (yes, "i-phone") from manufacturer Hanwang Technology, who briefly sold a device with that name in 2003 (three years before the iPhone's introduction).

[Via Engadget]

Back during the earnings call a few weeks ago, it was mentioned that Apple has a jaw-dropping almost $40 billion just sitting around in cash. In the chat, we started talking about other companies that might have that much money in the hopper -- Google came up, but I don't think we were able to guess another one. But it turns out Apple isn't even the most flush company out there, and the name of the first might surprise you: According to this chart on Silicon Alley Insider, Microsoft is currently sitting on just slightly more money than even Apple, with Google and Intel coming close behind; although Apple briefly pulled ahead of MS at the end of 2008, the Redmond Revenue Racers had more cash through most of '09 than Apple did.

Well how 'bout that. Of course, the current curves are not so favorable to Microsoft (after the Win7 update push slows down a bit) so it may not be long before Apple's pile grows even bigger. We can probably look for some significant acquisitions from all of these companies very soon -- with the rest of the economy down and lots of interesting ideas looking to sell, odds are we'll see some of this money spent on worthy purchases.

[via Cult of Mac]

Back when the iPad was a rumor, many contended that a successful Apple tablet would provide an easy and cheap way to distribute textbooks. Now, the Wall Street Journal reports that several publishers have come on board.

Specifically, publishers are in talks with ScrollMotion, the company behind, among other things, the very well-done Iceburg Reader for iPhone, to develop text-prep and other study guides for the iPad. McGraw-Hill, Houghton Mifflin Harcourt K-12, Pearson Education and the Washington Post Co.'s Kaplan Inc. are named in the article.

John Lema, chief executive of ScrollMotion, called the iPad's introduction "...the beginning of handheld education."

Of course, the iPad's reception and performance in the education market is unknown, and the device faces competition from inexpensive netbooks, systems fully entrenched in an existing system, or networks and budgets that don't allow for new purchases.

Still, we imagine the average college student being able to purchase textbooks with an iPad, and carry only that device across campus. Plus, publishers would be able to dodge the resale of used books by campus bookstores -- which doesn't generate any money for them. Finally, we can imagine an app that allows professors to push notations or assignments to students' iPads or even individual books.

Keep your eye on the iPad in the education market. It could push the device over the edge.

[Via Macsimum News]

Apple is well-known in the consumer electronics world for relatively large margins on products. According to a bill of materials (BOM) breakdown on the iPad recently performed by BroadPoint AmTech analyst Brian Marshall, the iPad should be able to add a sizable chunk of money to Apple's bottom line.

For the 16GB Wi-Fi iPad (US$499), Marshall found that the total BOM cost was $270.50. Manufacturing adds $10 to the cost, and warranty service costs add up to $20. In case you're wondering, the flash memory and the aluminum case both cost about $25, and the Apple A4 processor adds just $15 to the total cost of the iPad.

While the entry-level iPad may appear to be a cash cow for Apple, the 32GB and 64GB Wi-Fi models add even more margin to the mix. The 32GB model costs only $25.50 more than the 16GB, but the suggested retail price is $100 more. Apple will really make money on the 64GB model, which costs $76.50 more than the 16GB device but sells for $200 more.

Marshall had a chance to use an iPad, which led him to believe that "...this will be another grand slam product for Apple. The ergonomics and the 'media' experience of the device stood out the most to us." His original estimate was for Apple to sell about 2.2 million units in 2010. He's now expecting sales to be much higher. As an example, he feels that if Apple sells seven million units, calendar year earnings per share for Apple would rise from $12 to over $13.

Marshall is definitely bullish on Apple, having rated AAPL a "buy" with a target price of $264 per share. Considering the trashing that Apple and most other tech stocks have taken recently, the company has long way to go -- and a lot of iPads to sell - before reaching that target price.

[via Hardware Central]

It's Monday, let's sue Apple!

Chinese manufacturer Shenzhen Great Loong Brother Industrial is reportedly considering suing Apple over the design of the iPad, claiming that it bears too close a resemblance to their P88.

in an interview with El Mundo, Shenzhen Great Loong Brother Industrial's president Xiaolong Wu said that the two devices are "completely identical." In fact, the P88 features that are "completely identical" to the iPad include:

1. Windows XP
2. A webcam
3. A 250GB internal hard drive
4. A thicker and heavier body
5. A resistive touch display (the iPad uses multi-touch)
6. 1.5 hours of battery life

Plus they're both rectangles. With black borders.

Ed Sutherland summed it up best at Cult of Mac: "How do you get more attention for a largely unknown netbook at a time when the tech press has the vapors for Apple's iPad? You sue Apple and claim its new device is just a clone of your netbook."

Some people hate it, some people love it and some people attempt to predict its future.* Members of the last group include Shaw Wu of Kaufman Brothers and Needham's Charlie Wolf, both of whom are cautions about the iPad's performance.

Wu brandishes the obvious like broadsword, noting that the Wi-Fi iPad will probably sell better than those with a data plan because it will cost less and that 3G users can expect slower speeds that those with Wi-Fi. He feels that Apple's prediction of 10 million units sold in 2010 won't be realized. Instead, Wu surmises, they'll sell about 5 million.

Kaufman holds that the iPad is "...not a revolutionary product" that won't take off without certain 3rd-party solutions, like books and customized iPad apps. His sales prediction is even more conservative than Wu's at 4 million units sold.

They both like the entry price however, and we agree with them there. When the pundits were saying $1,000 before the announcement, we knew that wouldn't jibe with Steve's ambition to get one in as many homes as possible. Wu notes that the displays alone may be costing Apple $100 each, yet they've been very aggressive with the pricing.

Here's my prediction: Apple will sell a mountain of these things and by this time next year, the nay-sayers will be downloading Humble Pie 1.0.

*But none have USED it, so let's keep that in mind.