Needham & Company
How the iPad is like hybrid corn
August 6, 2011: 7:47 AM ETCharlie Wolf invokes "Diffusion of Innovations" in raising his Apple price target to $540
Photo: University of Nebraska - Lincoln
In Everett Rogers' classic text on how innovations percolate through societies, he describes how hybrid corn, despite 20% higher yield and resistance to drought, took two decades to become ubiquitous in the farms of Iowa. High-tech innovations spread more quickly these days, but they too follow Rogers' S curve, from early adopters to mainstream use to late adopters.
Needham's Charlie Wolf invokes Rogers' treatise in his semiannual reevaluation of Apple (AAPL), issued Friday in a note to clients that announced he was raising his 12-month price target to $540 from $450. The ultimate size of the tablet computer market, and the iPad's share of that market, are key to Wolf's revised valuation because it is based of several new assumptions:
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Mac is the hare, PC the tortoise
Last quarter, Apple's shipments grew nearly 7 times faster than the market's
December marked the 19th straight quarter that Mac shipment growth has outpaced the market's, and in note to clients earlier this week, Needham's Charlie Wolf used IDC's numbers to break down Apple's (AAPL) sales by market segment. Among his findings:
Mac sales to the worldwide home market grew 17.1% year over year in the December quarter, compared with the broader MORE
Philip Elmer-DeWitt - Feb 17, 2011 11:28 AM ET
