Back to Headlines Print Version Stumble it Tweet it Facebook LinkedIn

CORRECT: Apple Becomes Most Valuable Company, So What's Next?

(The story "Apple Again Becomes Most Valuable Company, So What's Next?" at 9: 56 a.m. ET incorrectly reported Apple's cash holdings in the second paragraph. A corrected version follows.)

By Shara Tibken and George Stahl

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Apple Inc. (AAPL) reclaimed the title of the world's most valuable company after reporting historic fourth-quarter results thanks to the surging popularity of its smartphone and tablet computer.

However, even as investors digest Apple's impressive performance in the final quarter of 2011, the following questions are already being asked: What's next? How can Apple maintain this momentum? And what will the company do with its nearly $100 billion in cash?

The company has its eye on televisions, and it is expected to release a new iPad this year, according to people familiar with the matter. But as is usually the case, Apple gave few clues Tuesday about its future plans and simply suggested that things were going in the right direction.

"Apple's momentum is incredibly strong, and we have some amazing new products in the pipeline," Chief Executive Tim Cook said in a statement.

That momentum has made the Cupertino, Calif., company the world's most valuable company on Tuesday, surpassing Exxon Mobil Corp. (XOM). Apple shares rose 6.6% in early trading to $448.21, giving it a market value of $417.7 billion, according to FactSet Research, above the $414.2 billion valuation on Exxon Mobil.

As for its future plans, though, Apple offered few specifics.

Regarding its $97.6 billion in cash, Apple said officials were discussing ways to use it, but that they didn't have anything to announce Tuesday. And while Apple noted the sale of more than 1.4 million Apple TV products in the fourth quarter, it reiterated that the TV business was just a "hobby." In addition, Apple declined to speculate on whether reports of a pending new iPad may dampen sales of the current one, as happened to the iPhone in the quarter preceding the new smartphone in October.

How Apple handles and builds on its success is a concern because of questions about the impact from the death of its founder and visionary, Steve Jobs, in October.

"The major risk in the Apple story is that the company may no longer be able to innovate at the same rapid pace or with the same disruption that characterized the era when Steve Jobs was at the helm," Needham analyst Charlie Wolf said.

At least in the short term, business is strong, as Apple's guidance indicates. Usually a conservative company, Apple provided an outlook for the current quarter that already was better than analysts were expecting.

Also easing concerns is Apple's cash hoard, which again caused analysts to speculate about share buybacks or a dividend. BMO Capital Markets analyst Keith Bachman noted that even if Apple instituted a 2% dividend--the average yield of companies in the S&P 500--it still would have a total cash balance of $165 billion to $170 billion at the end of its fiscal 2013.

"Importantly, we believe that by paying a dividend, Apple could open up the stock to a new class of shareholders," Bachman said. "Net, we believe either a stock buyback or dividend would not impact Apple's cash balance, but would benefit the stock's multiple."

Even with Apple's stock soaring to all-time highs, analysts say it has room to grow. Morgan Stanley analyst Katy Huberty said the shares "discount a significant deceleration in top-line growth" that she believes is unjustified.

Huberty noted that in addition to the company's near-term drivers of upside-- iPhone shipments, a new MacBook Air and a new iPad--Apple also has some longer term drivers. Those include an iPhone that uses speedier 4G wireless networks; a larger tablet market; overseas expansion, particularly in China; and the potential for Apple to enter the TV market.

While other consumer electronics companies are racing to catch up with Apple, ISI Group analyst Brian Marshall said there are only "minimal real competitive threats" to Apple's major product families this year.

"In our view, if something were to go wrong with the story, it would mostly likely result from idiosyncratic misexecution on the part of [Apple] or a material change in support from the global carrier community," Marshall said.

But he said both are unlikely given Apple's historical track record and that the company should have "smooth sailing" over the next few quarters.

-By Shara Tibken and George Stahl, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com

  (END) Dow Jones Newswires
  01-25-121025ET
  Copyright (c) 2012 Dow Jones & Company, Inc.