Apple Shareholders May Seek Clues on Next Steps

Apple Chief Executive Steve Jobs will hold his annual face-to-face meeting with shareholders on Thursday, and there will be no shortage of questions for a company famously stingy with information.

Apple’s (NASDAQ: AAPL) shares have been treading water around the $200 mark since last October, despite a strong December-quarter earnings report and massive hype around the iPad tablet, Apple’s newest consumer device to be launched in late March.

With a market capitalization that has approached $200 billion in recent weeks, analysts say investors may be looking for a fresh catalyst to send shares that have already more than doubled from a year ago, even higher.

Shareholders want to know what Jobs has planned for the iPad, whether the iPhone can sustain its growth momentum amid greater competition, and what the company will do with its eye-popping $40 billion cash balance.

“It’s a big company now and there are questions about the limits to growth in any market, and once you hit that $200 billion number, which they’re close to, people have questions,” said Pacific Crest Securities analyst Andy Hargreaves.

The iPad has generated nearly as many questions as publicity, since no one knows what the consumer appetite is for a so-called “third category” of mobile device, which bridges the gap between smartphones and laptop computers.

“For most investors at this point, the iPad is a show-me story,” Oppenheimer analyst Yair Reiner said. Although Reiner is bullish on the device, he said some see it as a niche product, unlike the iPhone, iPod or MacBook.

Analysts’ estimates put first-year iPad sales at about 2 million to 5 million units. It will appear in stores as early as the end of March, starting at $499.

It was unclear how much information Apple would provide at the shareholder meeting, which will be held Thursday at its corporate headquarters in Cupertino, Calif. Such events tend to be fairly routine, attracting small investors rather than big shareholders.

The attention at last year’s meeting was focused on Jobs, whose six-month medical leave had heightened concerns about his well being at the time. But with the CEO back at the helm, and with no major issues on the voting agenda, interest may shift to operational matters.

All seven of Apple’s directors will stand for re-election. Google Inc CEO Eric Schmidt resigned from the board last summer, but no one has been nominated to fill the gap.

Concerns about the future

Besides the iPad, investors will likely ask Apple about the iPhone, which now faces serious competition from an array of touch-screen devices, particularly those based on Google’s Android platform.

iPhone sales in the December quarter doubled, but came in lower than some had expected. “When you sell that many devices over that period of time and you have that big a change in the competitive environment, there’s going to be concern, and it’s legitimate. Android is much different than what they were competing against,” Hargreaves said.

And there is still no word on when the iPhone might be distributed through U.S. carriers other than AT&T Inc, whose network performance has come under fierce criticism, particularly in cities like New York and San Francisco.

Some analysts believe Verizon Wireless, owned by Verizon Communications (NYSE: VZ) and Vodafone Group (NYSE: VOD), could get an iPhone contract this year.

Broadpoint Amtech analyst Brian Marshall said international sales of the iPhone are the biggest driver of Apple shares over the next year, and investors are craving more information.

“What’s the company really doing to grow sales on the international side?” he said.

Cash galore

It is not a new subject, but Apple’s enormous cash hoard continues to be a big subject of interest for investors. The company generated $5.8 billion in cash in its most recent quarter, and boasts $43 a share in cash and securities.

“Something like a dividend wouldn’t necessarily help the stock, but I think investors would be happy to have that cash at their disposal,” Reiner said.

The company last bought back shares in 2001 and scrapped its dividend in the mid 1990s.

Apple’s cash balance is the largest among U.S. technology companies, and many analysts think the company should put at least some of the money to work.

“They’re in a league of their own, so at least start a new buyback,” Marshall said.

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