Shaw Wu with Sterne Agee today initiated coverage of Apple (AAPL) with a Buy rating as part of a broad transfer of coverage from analyst Vijay Rakesh, who is focusing more on semiconductor stocks going forward.

The note also included Cisco Systems (CSCO), Dell (DELL), Hewlett-Packard (HPQ), Ingram Micro (IM), Research in Motion (RIMM), Synaptics (SYNA), and Synnex (SNX).

Wu rates Cisco and HP a Buy, the rest, Neutrals.

Writing that the most frequently asked investor question at Sterne is whether Apple is still a buy, Wu emphasizes that he urges buying on dips, and that investors still under-appreciate the growth in Apple’s end-markets, as well as its ability transform existing markets and create new ones.

“One of the key concerns that we and many investors have is that AAPL has gotten to a size where it is becoming difficult to grow the way it has over the past 10 years,” writes Wu. “We believe this is a legitimate concern but at the same time, if any company could do it, it would be AAPL.”

He continues, “We think the beauty with the AAPL story is that the company doesn’t need to win everyone over to continue its success. The company just needs to continue winning a fair share of its vast end markets.”

Apple’s shares of computers could rise from about 4.5% to 8% to 10% in the next few years. “This is excluding the iPad business,” he notes, which, if factored in, could boost Apple’s computer share to 15% to 17%.

In the more than billion unit mobile phone market, we estimate that smart phones are about 20% of the market, up from 15% a year ago and 5%-7% only a few years ago. We believe smart phones will likely end up being 50%-60% of the market over the next 3-5 years, meaning the market could potentially more than double from here. People forget that AAPL is a relatively new player in mobile phones having entered in June 2007. We estimate iPhone market share to be about 25% within smart phones and only 3% in total mobile phones.

Wu raised his price target from Rakesh’s target of $400 to $445 for Apple.

As for Cisco, “Regardless, we believe sentiment has gotten overly negative with CSCO shares discounting a lot of bad news trading at 9x CY12 EPS (7x excluding net cash),” writes Wu. “Moreover, we would like to note that about 29% of CSCO’s market capitalization is net cash. We find the risk-reward favorable and believe patient investors with a longer- term horizon of 12-18 months will be rewarded.”

For HP, “We see great opportunity in HPQ growing its networking and storage businesses, where we believe the company can leverage its position as the top player in servers.” Also, people are looking for alternatives to Cisco, he notes.

What’s more, “We see webOS as a wildcard to be potentially disruptive and a key driver for growth, particularly for its consumer business.”

Wu has a $29 price target on Cisco shares and a $56 price target on HP shares.

Apple shares this morning are down $1.77, or half a point, at $349.19, while Cisco shares are up 12 cents, or 0.7%, at $17.57, and HP stock is down a penny at $41.10.

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Yonhap New Agency’s Lee Youkyung this morning cites comments from Samsung’s (SSNLF) head of mobile computing, Lee Don-joo as stating the company is considering lowering the price of its forthcoming Galaxy Tab 10.1, another version of its Galaxy Tab tablet computer, in light of Apple’s (AAPL) insistence on the $499 entry-level price for the iPad 2, which it announced on Wednesday.

“The 10-inch (tablet) was to be priced higher than the 7-inch (tablet) but we will have to think that over,” Lee is quoted as saying on Friday. As Youkyung notes, the pricing of the device, a larger, 10-inch version, which was unveiled at the Mobile World Congress in Barcelona last month, had not yet been unveiled. Lee also indicated that the iPad 2 design had caused the company to reconsider the some design elements of its machine.

“We will have to improve the parts that are inadequate, Apple made it very thin.”

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Shares of Motorola Mobility (MMI) are down $1.43, or 5%, today at $26.95, the worst performer in the S&P 500, after Cowen & Co.’s Matthew Hoffman lowered his rating on the stock to Neutral from Outperform, writing that the tablet prospects for the company are “fading” in the wake of yesterday’s iPad 2 announcement by Apple (AAPL), and that estimates are too high for the company.

Writing that the iPad 2 turned out to be “more competitive” than he had anticipated, and noting the earlier-than-expected ship date of March 11th, Hoffman cut his estimate for Motorola’s “Xoom” tablet computer to 2.2 million units this year from a prior 3.2 million, of which as many as 620,000 fewer units may ship in Q2, he estimates.

“The equation shifts more toward Apple — for now,” writes Hoffman.

With cash of $11 per share, Motorola may still be able to develop a “defendable long-term share position in tablets overall, and Android tablets specifically,” writes Hoffman, but “we now see that share ramp as a lower trajectory.”

This is the second downgrade in the last 24 hours that I’ve seen. Yesterday, C.L. King’s Larry Harris cut the stock to Buy from Strong Buy.

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Shares of Apple (AAPL) are up $5.89, or 1.7%, this morning at $358.01, retaining the glow of yesterday’s iPad 2 announcement that seems to have been met largely very favorably.

It doesn’t hurt that Gartner today cut their PC forecast for this year and next, based in part on their belief that the iPad and its ilk are delaying some consumer PC purchases.

Charlie Wolf, Needham & Co.: Reiterates a Buy recommendation and a $450 price target. Apple showed once again, he thinks, that “it’s more about software than hardware,” with the unveiling of the GarageBand and iMovie apps for the device. “iPad 2 immediately obsoletes a flood of media tablets that are finally beginning to appear a year after the iPad’s introduction,” writes Wolf. “Competitive tablets can emulate the hardware features of the iPad. But none can or probably never will match its software. Nor can they match its price.” Wolf left his estimates for this year unchanged.

Our conclusion is the sky’s the limit. And on that note, it was recently reported that the FAA has approved the iPad as a substitute for the paper charts pilots have traditionally used. This report suggests that the iPad could eventually become a fixture in the cockpits of every commercial plane. At this early stage it’s virtually impossible to size the iPad and media tablet market. In a previous note ( we estimated that the addressable market for media tablets could reach 875 million units. But its ultimate size might be far larger, depending on the imagination of software developers and users in the consumer and business markets.

T. Michael Walkley, Canaccord Genuity: Reiterates a Buy rating on Apple and a $460 price target. He’s impressed with the features and pricing on iPad 2 relative to the tablets he saw at the Consumer Electronics Show in January and Mobile World Congress in February. The price alone will “pressure sales of competing offerings including the Motorola [Mobility (MMI)] Xoom ($599/$799) as we believe consumers will overwhelmingly choose iPad 2 versus other tablets at these prices.”

Keith Bachman, BMO Capital: Reiterates an Outperform rating and a $410 price target. The iPad 2 was about as expected, no surprises. It’s a better produce in terms of industrial design and software, with iOS 4.3′s enhancements, and it has “several key competitive advantages,” including an early lead, the iOS “ecosystem,” the apps selection; the distribution channel (retail and carriers), the price, and the “supply chain optimization” Apple’s got.

Robert Cihra, Caris & Co.: Reiterates a Buy rating on Apple, while raising his price target to $460 from $450. He notes the March 11th ship date is a month earlier than he’d expected for the iPad 2. Echoing observations made yesterday by Sanford Bernstein’s Toni Sacconaghi, Cihra notes that, “Apple’s more aggressive iPad cost-vs-price strategy leaves no premium umbrella for commodity vendors to undercut on a spec-for-spec basis.” Any vendor thinking they can match Apple on that basis is “kidding themselves,” he writes. Cihra raised his March quarter (fiscal Q2) revenue estimate by a half a billion dollars to $24.5 billion and hiked his EPS estimate to $5.76 in EPS, up from $5.59, to reflect a higher iPhone estimate, at 16.6 million, up from a prior 16.1 million units, and higher Mac sales, at 3.85 million units, up from 3.7 million, and a higher-than-expected gross margin of 39.7%, versus his prior 39.4% forecast.

Brian Blair, Wedge Partners: The iPad was “significantly upgraded,” in his opinion, and a “technology leapfrog over the competition.” He reiterates a forecast for 45 million iPads sold this calendar year, and a 70% market share for Apple. On the component side, he expects that Qualcomm (QCOM) is supplying the baseband for the tablet. Blair notes that as far has he can tell, the rear-mounted camera on the iPad 2 is a 1.2 megapixel device, not a 5-megapixel sensor, which he believes may be a “slight disappointment” for OmniVision Technologies (OVTI), which might have been expected to sell its higher-end camera sensors into the iPad 2.The worst news for competitors is the price: “The critical price is the entry-level model, which at $499 sets a difficult bar for competitors to meet this year.”

Tavis McCourt, Morgan Keegan: Reiterates an Outperform rating on Apple and a $441 price target. There was nothing extremely surprising, he notes, but “other vendors will have difficulty selling 10-inch tablets at similar price points and functionality as Apple.” But the tablet category as a whole is still “incrementally positive for nearly every smartphone vendor adding this form factor.”

Brian White, Ticonderoga Securities: Reiterates a Buy rating and a $550 price target. White, who on Tuesday said Apple would have to make a “compelling case” to consumers for the device, writes that “the day could not have gone better.” “We believe Apple made a compelling case for why iPad 2 has the potential to further accelerate the momentum initially provided by the iPad 1, and in the process, provided investors with greater confidence that Apple is well positioned to maintain its leadership position in the rapidly growing tablet market.” White argues the price gives consumers “bang for their buck,” and he lauds Apple’s “Smart Covers,” flaps made of leather or polyurethane, that snap on with magnets, as partly “granting our wish” for the iPad to come in colors, something he sees as a differentiator.

Richard Gardner, Citigroup: Reiterates a Buy recommendation and a $415 price target, while standing by his prior estimate for sales of 6 million iPads in the current fiscal Q2, and 27 million units this fiscal year. He sees Apple retaining 80% share of the tablet market this year. “Based on the announced tablet offerings, we believe comparable tablets will need to price meaningfully below the iPad in order to take share in this market,” writes Gardner. “We view this as highly unlikely given that competitors would essentially be breaking-even or losing money at those prices.”

Mark Moskowitz, JP Morgan: Reiterates an Overweight rating and a $450 price target. Apple raised the bar for the tablet market. “Considering the competitive launches so far, with higher price points or clumsier form factor/technical specs, our assumption of Apple’s tablet market revenue share at 68% in 2011 may be conservative, particularly after today’s iPad 2 rollout.” The improvements in the form factor are “more than good enough,” writes Gardner, and the tech improvements, such as the new A5 chip, are also more than good enough, as far as he’s concerned. GarageBand and iMovie may extend the devices appeal to the 8- to 18-year-old age category, he thinks.

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Research firm Nielsen today opines that in the November to January time frame, among “post-paid subscribers” in the U.S., phones running Google’s (GOOG) Android operating system are collectively pulling ahead of Apple’s (AAPL) and Research in Motion’s (RIMM) devices, with 29% share of smartphone sales in the U.S. by software platform.

Apple and RIM, however, are neck-and-neck and ahead of other hardware vendors, each with 27% share, well clear of the next closest smartphone competitor, Taiwan’s HTC, with just 12% share. Motorola Mobility’s (MMI) share was 10%, they note.

Phones running Microsoft’s (MSFT) Windows Mobile or Windows Phone 7 OS had 10% of the U.S. smartphone market in the same time frame.

Note that the Nielsen numbers, as they’re through January, would not reflect the roll-out of Apple’s iPhone 4 with Verizon Communications (VZ) in February.

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Folks, while I had to mind the fort here in New York, my friend Mark Veverka, Barron’s Silicon Valley connection, was at today’s unveiling of Apple’s (AAPL) iPad 2. He offers the following impressions from the presentation, and from a short bit of quality time spent with the device. Thanks, Mark!

Steve Jobs didn’t appear much different than the last time we saw him. Of course, he is still very thin as his challenges with gaining weight have been well documented. He put in another patented pitchman performance. It was classic Jobs, but no mention of his health or his leave of absence from the C-suite.

While the announcement wasn’t a game-changer, I think we have become jaded to a degree when it comes to some of the incremental improvements to Apple products. In this case, the ability to increase speed dramatically and add two cameras and various other new bells and whistles to the operating system while decreasing the thickness of the device by one-third is pretty remarkable.

Much of the credit goes to its proprietary A5 chip produced by Apple’s “chip wizards,” as Jobs refers to his semiconductor engineers. These enhancements were achieved without decreasing battery life and increasing the price. As the WSJ and others have noted, Apple’s lower production cost, superior retail channel and aggressive pricing seems to be its biggest competitive advantage.

I held the iPad2 in one hand and my own personal 1.0 iPad in the other, and the difference in weight was certainly noticeable. Certainly, the version 1.0 black cases are also heavier than the new “smart covers” held by magnets.

Will it change your life? Hardly. But from an engineering standpoint, and you can ask any smartphone engineer about this, adding considerably more functionality while decreasing the overall real estate footprint is a very impressive accomplishment.

It is no coincidence that today’s Apple announcement at the Yerba Buena Center in San Francisco came during the middle of the Game Developer Conference being held at the Moscone Convention Center next door. By increasing the speed of the graphics by nine times and adding the gyroscope function, Apple was aiming directly for the hundreds of computer game developers in town for the trade show.

I’m personally impressed with the new iMovie app that will sell for $4.99. As a former television reporter, I learned to edit video using three-quarter inch video tape on massive decks with expensive editing consoles that would consume small rooms. Now, through the elegance of Apple software, one can do more sophisticated video editing on iPad than was once possible in last century television news operations.

The GarageBand app will turn your kid’s bedroom into a rock-and-roll recording studio. Consider yourself warned.

I would note that the other former Barron’s West Coast editor, our pal Eric Savitz over at Forbes, this afternoon offers his thoughts on the day. Eric’s impression is the event showed the high hurdles Apple’s competitors have to jump, and he muses on whether the iPad will be like the iPod, completely dominating the category, or whether it will be more like the iPhone, sharing the pie, but with a very large slice.

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Analysts at Detwiler Fenton this morning write that Motorola Mobility’s (MMI) “Xoom” tablet, which went on sales last week at Verizon Communications’s (VZ) Verizon Wireless, may be having a rough first go of it.

The tablet computer debuted last week to fairly favorable reviews from, among others, The New York Times’s David Pogue, with The Wall Street Journal’s Walt Mossberg calling it the first real competitor to Apple’s (AAPL) iPad.

“After almost one week on the market, it appears that the sell through of Motorola’s Xoom has been extremely light,” reports the firm, without specifying sources for the information. Detwiler attributes the apparent lackluster results to, “its high price, lack of consumer applications and the anticipation for today’s expected Apple (AAPL) iPad 2 announcement,” which is expected to be this afternoon.

Reports out of Asia, moreover, that the Xoom might be coming out of factories at a rate of 700,000 to 800,000 units this quarter are “outrageous,” Detwiler asserts, given the shortfall in this first week.

Moreover, Best Buy (BBY) having the exclusive to retail the thing, combined with its high price, appears to have been a mistake on Motorola’s part:

We believe that total channel sell-in for Q1 will only amount to 150K-200K units, depending on how aggressive Verizon (VZ) gets with inventory stocking. It appears that BBY is sitting on enough inventory to get the retailer through the end of Q1 without problem at this point. Note that VZ and Best Buy (BBY) have a 60 day exclusive on the product in the US a major marketing mistake by MMI in our opinion. While MMI launched the Xoom at $799 at retail (or $599 subsidized with 2-year contract at VZ), retail contacts believe an unsubsidized price point of $649 and subsidized price point of $499 is about the price ceiling for such a product. However we don’t expect to see such a price point anytime soon unless MMI is willing to sacrifice margins and/or VZ ramps up subsidy support.

Detwiler expects Best Buy will “rethink” the pricing of the device to try and boost sales.

No wonder, then, that The Journal’s Ben Worthen today writes of looming talk of a tablet price war.

Motorola shares today are down 53 cents, or $1.80, at $28.97.

Previously: Apple: Pricing Of iPad A Formidable Moat, Says Bernstein, March 2nd, 2011.

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In advance of Apple’s (AAPL) media event in San Francisco later today, at which it is expected to unveil the second generation of the iPad, Sanford Bernstein analyst Toni Sacconaghi today asks in a note to clients why competitors have not been able to undercut Apple’s price on the iPad despite the many, many tablets that have been unveiled or are known to be in development.

“Apple’s products have traditionally commanded a significant price premium in the marketplace, largely due to the company’s brand, styling and products’ superior user experience,” observes Sacconaghi. “Accordingly, undercutting Apple on pricing has been the de facto strategy for competitors. Surprisingly then, no competitor has yet matched Apple on tablet pricing, which begs the question of why.”

Well, there are four reasons why Apple has a 7.5 to 9.8 percentage-point advantage in its cost to make the iPad, even though by his estimate, the “entry-level” iPad, at $499, has only a 25% gross margin:

1. The first reason Sacconaghi offers is that there is no “price umbrella,” meaning that Apple has not chosen to scoop up extra margin by pricing higher, instead choosing to take a hit on gross margin. Sacconaghi notes that most of the 2.6-percentage-point decline in Apple’s gross margin in last fiscal year’s Q3, when the iPad was introduced, appears to be mostly a result of the iPad’s cost. Despite some claims from the supply chain, and from research shops such as iSuppli, that the device could have margins of 40% to 50%, he thinks those estimates are inflated and that the initial margin on the product was 26% to 30%. It likely may be trending around 32% lately, thanks to favorable component costs.
2. Which brings us to point two, Apple’s relative advantage on component costs. Apple is “leveraging its large cash balance by spending $3.9 billion with three vendors in a combination of prepayments and capital expenditures,” writes Sacconaghi, and, “We believe these are likely to be around displays and touch panels,” a claim that has been made by others, including Piper Jaffray’s Gene Munster, who’s written that displays are the new battleground for Apple to exert its influence. Moreover, “We estimate that Apple accounts for 20%+ of global NAND flash purchases on account of which (we note that Apple had also prepaid for NAND inventory in prior years) it could get a discount of 10% over market prices.” (For another view into Apple’s recent component buying, see the note by RBS’s Didier Scemama back in January.)
3. Third, Apple sells a lot of product through its own retail stores, giving it a, “Structural distribution advantage” that may save Apple 4 percentage points relative to competitors.
4. Lastly, Apple’s custom “A4″ processor based on ARM Holdings (ARMH) CPU designs, “potentially saves $10 per unit vs. competitors,” he argues.

The aggressive pricing, a change from the iPhone’s original pricing approach, writes Sacconaghi, makes sense given the tablet is tied to Apple’s “ecosystem,” and given how big the market may be. And he thinks competitors will find it a formidable obstacle:

We believe that Apple’s aggressive pricing for the iPad is consistent with (1) the increasing returns nature of the tablet market; (2) Apple’s view that the tablet market will be “huge” and “bigger than the PC market” and will attract competition from smartphone and PC vendors alike; and (3) the company’s desire to fully capitalize on Tim Cook’s assertion that the iPhone is the “mother of all halos”. We note that aspiring tablet competitors are further thwarted currently by reported shortages in key components including touch panels, which makes it harder to bring a product to market, let alone at competitive prices.

Sacconaghi reiterated an Overweight rating on shares of Apple and a $450 price target, calling it his Top Pick.

Apple shares today are up 79 cents, at $350.10.

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The Gaurdian’s Josh Halliday this morning offers some tidbits from The New York Time’s (NYT) chairman Arthur Sulzberger, appearing at the Financial Times’s Digital Media conference in London today.

Sulzberger said that the company will put up its paywall “very shortly,” and that the company does not expect to see a “massive drop in traffic.” Sulzberger defended the company’s investment in 1,150 journalists and 25 bureaus at a time of downsizing in the industry.

Sulzberger also reiterated an intention that the app for the New York Times on Apple’s (AAPL) iPad will be cease to be free at some point, though he wouldn’t get into details or timing, according to Halliday. As for the tussle between publishers and Apple, Sulzberger chalked it up to just another form of dealing with newstands, something publishers have always done.

Plus, Steven Brill — remember Brill’s Content? — was on the panel with Sulzberger and said he expects the Times can make $80 million to $100 million in new revenue each year with its paywall, while holding onto 90% of its online audience. No word on how much he thinks it will cannibalize print circulation.

In related news, NY Times’s CEO Janet Robinson this morning said, “The pay model for NYTimes.com is in the final testing phase, and we expect it will launch shortly.”

Her remarks were in advance of an appearance later today at the Morgan Stanley Tech, Media and Telecom conference.

Robinson has good reason to move as fast as possible into digital: expenses are rising, particularly newsprint. Robinson this morning said the company is seeing a 1% to 2% rise in operating expenses in the current quarter because of higher newsprint prices, pension expense and promotion costs.

She said print ad rates revenue declined “in the low single digits” as a percent in February, similar to January’s trend.

NYT shares are down 16 cents, or 2%, at $9.96.

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Kara Swisher with AllThingsD today writes in her “BoomTown” column that several anonymous sources close to Apple (AAPL) suggest CEO Steve Jobs is “definitely considering” making an appearance tomorrow at the media event the company is hosting in San Francisco.

At least one Website this morning claimed to have information Jobs might appear tomorrow.

But, writes Swisher, “what BoomTown would like to see would be more of a focus on the iPad 2 itself, rather than armchair diagnoses of Jobs’ fitness based on any appearance he might make.”

Swisher urges the press, “show a level of respect to him by paying more attention to what bells and whistles the iPad 2 has rather than to how his jeans are fitting.”

Swisher notes Jobs recently appeared at the left hand of President Obama during a dinner in Silicon Valley, among other public appearances Job has made of late.

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