Feb. 29 (Bloomberg) -- Apple Inc.’s market capitalization topped $500 billion for the first time, cementing its lead as the world’s most valuable business and reaching heights not seen by any company since the last recession.
The shares gained 1.3 percent to $542.44 today, bringing its market value to $505.8 billion. Apple has risen 34 percent in 2012, following gains in each of the past three years. The company is worth $98.1 billion more than the world’s second-most-valuable business, Exxon Mobil Corp.
Apple investors are anticipating a sales boost from the company’s latest iPad tablet computer, due on March 7. They’re also banking on a new iPhone coming by the third quarter and the possibility of Apple offering a dividend, its first since 1995, said Howard Ward, a money manager at Gamco Investors Inc. in Rye, New York. Demand for Apple’s products has helped the company increase profit faster than its stock price, making the price-to-earnings ratio more favorable, he said.
“Impressively, its market cap has risen to the $500 billion level as its price-to-earnings multiple has actually contracted,” said Ward, who helps oversee $36 billion in assets. “At 12 times this year’s expectation of earnings, it stands in stark contrast to the experience of Cisco Systems, which sold at over 100 times earnings when it approached the $500 billion level in 2000.”
After trading near the half-trillion-dollar mark during the dot-com era, Cisco Systems Inc. has tumbled to a market value of $107.1 billion. The last U.S. company valued at $500 billion was Exxon in April 2008, according to data compiled by Bloomberg. The Irving, Texas-based energy producer now trades for $407.7 billion.
Under Steve Jobs, Apple transformed itself from an also-ran in the personal-computer market to a leader in consumer electronics, music sales and mobile devices. The Cupertino, California-based company has maintained its growth since Jobs’s death in October, reassuring investors that Apple can continue updating products and pioneering new markets.
“What Apple has done is it gives you an indication of where the markets are going,” said Mark Bronzo, who helps manage about $24 billion at Security Global Investors in Irvington, New York. “Their products tend to lead, and everyone tends to follow.”
Apple posted net income last quarter of $13.1 billion, one of the highest quarterly profits on record, putting it in the same league as energy companies such as Exxon and Moscow-based OAO Gazprom, data compiled by Bloomberg show. Per-share profit of $13.87 for the period was more than Apple earned in any full year before 2010. Sales rose 73 percent to $46.3 billion.
The results also marked the first time revenue topped Hewlett-Packard Co.’s, underscoring how Apple’s focus on sleek, touch-screen mobile devices has rearranged the technology industry’s pecking order. Net income, meanwhile, exceeded total revenue at Google Inc., Apple’s largest rival in mobile operating systems.
New Chief Executive Officer Tim Cook is pushing deeper into China and adding carriers for the iPhone. Only 30 percent of the world’s wireless-service providers now carry the device, giving Apple room to grow, said Katy Huberty, an analyst at Morgan Stanley in New York.
The risk is that carriers may refuse to continue paying big subsidies to sell the iPhone, making it less attractive to consumers, said Ed Zabitsky, an analyst at Toronto-based ACI Research.
Going Apple’s Way
“A lot has gone in Apple’s favor the last few years,” said Zabitsky, the lone analyst with a sell rating on the stock. “There was great execution on their side, and poor execution by its competitors.”
Apple plans to hold an event on March 7 in San Francisco, where it’s expected to unveil the latest iPad. The new device will sport a high-definition display, run a faster processor and work with speedier wireless networks, people familiar with the product said in January.
The company is counting on the new iPad to beat back competition from newer devices running Google’s Android software. Apple has sold more than 55 million iPads, generating at least $34.5 billion in revenue.
The company also may use the March event to unveil an updated Apple TV set-top box, which could stream higher-resolution video to consumers’ televisions, according to Gene Munster, an analyst at Piper Jaffray Cos. in Minneapolis. Apple is planning to release a full television set as early as the December quarter, Munster said in a report, reiterating an earlier prediction.
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