Internal Commentary No. 1 Draft 1

Internal Commentary No. 1 Draft 1 - COMMENTARY COVERSHEET...

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COMMENTARY COVERSHEET Economics commentary number: 1 Title of extract: Did Apple's iPad Come Just in Time? Source of extract: SmartMoney Magazine Date of extract: April 19, 2010 Word count: 778 Date the commentary was written: March 20, 2010 Sections of the syllabus to which the commentary relates: Microeconomics Candidate name: Gaith Kalai Candidate number: 000066 - 058 Did Apple's iPad Come Just in Time? 1
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by Will Swarts Smart Money Few companies enjoy the kind of media attention Apple does when it releases a new product. Like the iPhone and iPod before it, the iPad has been on the cover of news magazines, among the most searched keywords of gadget blogs and held aloft on national television by daytime talk show hosts. The hype has benefited Apple. The company’s stock has risen roughly 17% for the year to date and is now trading just off its record high of $251 a share. Still, although the spotlight can offer any company or product some cultural significance and a bump in investor confidence, Apple investors should be more focused on two basic questions: How much money is the company bringing in now, and how much could it bring in later? As for the first question, investors will get the latest data point Tuesday after the markets close, when Apple is scheduled to release its second-quarter results. (The results do not include iPad sales or presales.) Wall Street expects the Cupertino, Calif.-based company to report earnings of $2.43 a share, which would represent an 83% increase from a year ago, when the recession weighed more heavily on consumer spending. Analysts predict several factors will have helped lift Apple’s bottom line during the last quarter. First, personal computers remain a core part of the business. Thomas Weisel Partners analyst Doug Reid said in a note that the success of the Mac brand was part of the reason he lifted his second-quarter revenue estimates from $11.76 billion to $12.06 billion. Reid now projects the Mac computer segment will account for nearly a third of that revenue ($3.9 billion, up 31% from the year-ago period). Analysts also say a savvy pricing strategy helped the company control margins during the recession but positioned it to widen their profits as the economy improved. "They are playing chess," says Ezra Gottheil, an analyst with Technology Business Research, an independent industry research firm based in Hampton, N.H. He says Apple was able to keep its personal computer business robust by keeping its lower-end MacBook laptop priced at $999, but stuffing the next level MacBook Pro with attractive features and packaging it in an appealing clamshell case. At $1,199, he says consumers were willing to spend more money to get what
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