Wall Street Beat: IPad Spurs Technology Shares Forward

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The launch of Apple's iPad helped propel technology stocks this week on optimism that consumer demand will be strong this year, analysts say.

The iPad launched to great fanfare over the weekend, complete with giddy sales forecasts from industry researchers and Wall Street investment banks.

By Thursday, the iPad had already reached sales of 450,000 units, confirmed Apple CEO Steve Jobs at a news conference, handily beating analysts' first week sales forecasts of between 200,000 to 400,000 units.

Excitement over the new device is one reason stock market watchers say technology stocks have outperformed the broader market so far this week.

The technology-heavy Nasdaq Composite Index has risen 1.42 percent to end regular trade Thursday at 2436.81, compared to 2402.58 ahead of the holiday weekend and launch of the iPad.

The broader Dow Jones Industrial Average ended Thursday at 10,927.07, exactly the same as last Thursday. It flirted with 11,000 early this week for the first time in over a year and a half, but failed to retake that level due to renewed worries over Greek debt. The Standard & Poor's 500 index finished Thursday at 1186.43, up 0.7 percent since last week.

The renewed interest in Apple has pushed its shares up to US$239.95. It is not a new high for the year, but a level at which the company's market capitalization exceeds that of a number of blue chip companies.

Apple's market capitalization -- its value based on its share price times all outstanding shares -- was $217.59 billion as of the end of trade on Thursday, compared to $208.17 billion for Wal-Mart Stores and $198.09 billion for General Electric. Among technology companies, Apple is above Google's $198.09 billion, but below Microsoft's $262.32 billion. Oil company Exxon Mobile remains the biggest company in America based on market capitalization, at $320.39 billion.

Some analysts see Apple's rise as a result of strong research and development, particularly in products such as the iPad and iPhone.

Apple has spent a total of $3.94 billion on R&D over its past four fiscal years, the last of which ended Sep. 26, 2009, when its sales hit $36.54 billion. That figure is up 89 percent from $19.32 billion from its fiscal 2006, according to figures from Apple's annual reports filed to the Securities and Exchange Commission. Over a similar time period, Microsoft has spent $30.88 billion on R&D to increase its sales 32 percent to $58.44 billion, according to figures in annual reports available on its Web site. Microsoft's fiscal year ends on June 30 each year.

Expectations for Apple remain high, particularly for iPad sales through the rest of this year.

Market researcher iSuppli expects iPad sales to reach 7.1 million units this year due to an attractive design and compelling applications, while some investment banks forecast sales as high as 10 million.

Semico Research believes the iPad means the era of the tablet PC is finally here, after failed attempts in the past such as Apple's Newton. Internet access, social networking and e-books have given tablet devices a new purpose, the market researcher said in a recent report.

Dozens of companies are planning rival tablet devices this year. Hewlett-Packard has already announced the Slate, while Asustek Computer is planning the Eee Pad. Over 50 tablet devices are expected to launch this year.

Semico believes most sales forecasts for the iPad are too high and predicts sales of the devices will likely reach about 1.8 million units this year. "Higher volumes will follow," the researcher said, adding that, "this time around, tablet PCs will succeed."

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