Wall Street Beat: All eyes on Apple, Yahoo

Yahoo and Apple announcements overshadowed all other tech events this week for IT investors. Apple's iPhone 2.0 launch raised mobile and consumer market issues, while the breakdown of talks between Yahoo and Microsoft removed the possibility of a truly game-changing event in the Internet realm.

All eyes were on Apple's US$199 iPhone 2.0 launch this week as the announcement, made Monday by CEO Steve Jobs at the Worldwide Developers Conference in San Francisco, stirred concerns -- and hope -- for the overall mobile device and retail tech markets.

Apples' good fortunes since the introduction of the iPod have depended on the success of its hit consumer products, which in turn have a "halo" effect on its Mac line. But attention is also paid to these launches because the devices themselves are seen as harbingers of things to come in the music, broadband video and smartphone markets, and IT investors bet heavily on them.

Right after the launch, the low price on the 8G-byte model and the fact that the company did not release a high end 32G-byte version, stirred fears that Apple would see its profit margin erode. Apple shares sank $4.03 to close Monday at $181.64. But the day after, high-profile analysts issued research reports saying the low price will help increase market size. They also said the already widespread geographical coverage, and an ending to exclusive carrier agreements, are setting the stage for iPhone user growth.

Citigroup and Lehman raised price targets on Apple Tuesday, sparking Apple shares to rebound to $185.64. Citing "potential for significant market share opportunities in the handset and personal computer markets," Merrill Lynch on Wednesday added Apple to its US 1 list, the investment bank's top-ranking investment suggestions for "buy"-rated U.S. companies, and reiterated its $215 price target. The investment firm also raised its forecast of 3G iPhone unit sales, estimating a 12 percent increase in fiscal 2009 to 22 million units, and a 13 percent increase in fiscal 2010 to 34 million units.

But Apple shares slumped again on Wednesday, as tech companies were dragged down with the rest of the market on renewed fears of high energy costs and inflation. The uncertain economy has depressed IT company share prices this year.

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