Barclays Capital Defending Apple

Following a downgrade from Goldman Sachs, Barclays analyst Ben A. Reitzes steps in to defend the stock , stating that Apple's valuation is compelling given the $27 per share in cash and $9 per share in free cash flow in 2009. He suggest a 3G launch of the iPhone in China in mid-2009 and that the company would benefit from an ultra-portable device in the $600-$700 range.

Despite a weak economy, we believe Apple's valuation is compelling given about $27/sh in cash & prospects for $9/share in free cash flow in FY09.

Summary
• NPD November Monthly Data suggests US PCsales decelerated likely due to the economy butalso due in part to the timing of Black Friday thisyear. Macs showed significant deceleration fromOctober in the US (tough compares both q/q andy/y). The size of y/y declines abated for iPods butthe category still posted double-digit declines.

• China is expected to issue licenses for 3G telecom services by the beginning of 2009. We believe this timing suggests a mid 2009 debut for the 3G iPhone in mainland China.

• We also note that the iPhone is now selling online via AT&T but not through websites for Apple or Best Buy. We still estimate sales of 4.5mmiPhones for the December quarter.

• Netbooks & iPods continue to dominate the top seller lists at Amazon.com. Apple's iMacs (with rebates) now sit firm atop Amazon's desktop category. We still believe that Apple would benefit from an ultra-portable device in the $600-$700 range, and believe it can be unique and NOT like low-end netbooks.