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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What are we to make of Acer’s (ACEIF) troubles?

The Taiwanese computer maker, tied most of the time with Dell (DELL) for worldwide PC unit sales, late Friday cut its Q1 outlook for revenue, and its outlook for Q2 unit shipments, citing weak demand in Europe and the U.S., as reported by Mark Lee with BloombergBusinessWeek.

The American Depository Receipts traded in the pink sheets here are down $1.30, or 11%, at $10.55. On the Taiwan stock exchange, Acer’s ordinary shares fell by 7% or so overnight, to $67.80 in New Taiwan dollars.

Citigroup’s Kevin Chang this morning advises selling Acer, which had already been his position, but he also cut his target price to $49 New Taiwan dollars from $60 previously, stating that the forecast is more worrisome than the cut in Q1 results.

“We are not surprised by Acer’s weak results. We have highlighted in our previous reports that Acer is the biggest victim to tablet PC cannibalization of consumer notebook in developed markets,” writes Chang.

“What concerned us more than the weak results is Acer’s continuous guidance miss. With Acer’s outstanding execution track record, it should have seen this coming and made necessary adjustments such as a lower inventory level or aggressive cost reduction rather than setting up aggressive internal target/external guidance.”

Acer had better hope tablets peak at about 50 million units a year. If so, notebook sales could rebound in 2012. “However, if tablet PC becomes a bigger market than NB (as Apple indicated), Acer could become a much smaller company in the next few years.”

HSBC’s Jenny Lai also takes a dim view of Acer’s prospects: she cut her rating on the ordinary shares to Underweight from Overweight, and cut her price target to $61 in New Taiwan dollars from a prior $96. Her earnings estimate is cut by 16% for this year.

Keith Bachman with BMO Capital, on the other hand, thinks much of the forecast cut may have to do with shortages of components because of Japan’s struggle. Even though Acer didn’t attribute anything to Japan, Bachman thinks that “some component tightness limited the ramp in the month of March, and was not able to offset the weakness in January and February.”

Bachman reads through to the implications for Dell and Hewlett-Packard (HPQ): In the April quarter, he sees PC revenue falling 1% for Dell and 7% for HP; for the July quarter, he sees revenue up 4% for DELL and 2% for HP.

Both companies could see some pressure on profit, however, from component shortages, whereas prior quarters had seen both benefit from falling prices for components. Bachman has an Outperform rating on HP shares and a Market Perform rating on Dell shares.

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Barclays Capital analysts today cut their estimates for PC sales, handset sales, and for communications equipment on the lingering effects of Japan’s disaster, though the team generally thinks the shares already reflect the worst.

Japan is likely to cause supply chain disruptions this quarter and next, though things may improve in the second half of the year, the firm believes.

Analyst Ben Reitzes cut his full-year 2011 PC forecast to 5% unit growth from 8%, with Q2 unit sales probably flat with Q1 given what he thinks will be a 46% drop in Japan.

That means Hewlett-Packard (HPQ) and Dell (DELL) will probably have trouble beating estimates for their April-ending quarters. Apple (AAPL) probably can deliver upside for Q1 ending this month based on “strong” demand for both the iPad 2 and the new MacBook Pros. Though component shortages could affect Apple next quarter, “Apple can make up for units in future periods,” writes Reitzes.

Dell and HP each account for 10% of PC units shipped into Japan, he notes, with Apple having 4%. Reitzes reiterated an Equal Weight rating on HP and Dell and an Overweight rating on Apple.

I should note that not all of this is Japan: “A portion of the reduction of our PC forecast reflects weaker than expected consumer demand in Q1 and prospects for slightly slower consumer notebook growth in the wake of iPad 2,” he writes.

Reitzes expects there may be a jump in hard drive orders for Seagate (STX) and Western Digital (WDC) as those companies’ customers look to build inventory to avert any shortage. A shortfall in supplies, however, such as aluminum substrates, could hurt shipments later in the year.

Analyst Jeff Kvaal cut his handset estimates for Q2 and Q3 to 733 million units from 756 million on concerns over supply constraints. Research in Motion (RIMM), Nokia (NOK) and Motorola Mobility (MMI) may be affected, writes Kvaal, and he trimmed his estimates on them all by a couple of pennies per share each for the second calendar quarter.

Kvaal also cut estimates for comm equipment makers Cisco Systems (CSCO), Juniper Networks (JNPR), and F5 Networks (FFIV).

However, “We believe long-term investors should consider viewing the disruption as short-term weakness,” writes Kvaal. He maintains an Overweight rating on shares of RIM, and Motorola, and Juniper, and Equal-Weight ratings on Cisco and F5.

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Credit-Suisse’s Kulbinder Garcha late yesterday issued a massive — I’m talking 370 pages, plus accompanying documents — initiation-of-coverage note on several IT hardware names, including Apple (AAPL), Hewlett-Packard (HPQ), EMC (EMC), International Business Machines (IBM), Xerox (XRX), NetApp (NTAP), Dell (DELL), and Lexmark (LXK).

He starts with an Outperform rating on Apple, EMC and HP; a Neutral on IBM, Xerox and NetApp; and a Sell rating on Dell and Lexmark.

Garcha’s overarching theme is the “smart era,” as he calls it, the notion that an explosion in virtualization technology and in mobile computing will propel demand for data center equipment.

Among the rather provocative elements of the report, Garcha claims to have “developed what we believe is the first econometric model for projecting computing demand.”

Specifically, Garcha says his team has analyzed 1,000 data points across 42 countries and discovered a “statistically significant relationship between PC affordability and the PC penetration per capita.” The upshot is, PCs are price-elastic, and that the installed base of PCs can be expected to rise to 1.2 billion units from 680 million in 2010 over the next five years, helped by “average quality low-end PCs” in the $200 price range.

However, most of that will be tablet computers, writes Garcha. Yes, Garcha includes tablets as part of the overall PC industry, which some analysts don’t.

Tablets will “have a more meaningful impact on the PC industry than Netbooks historically,” he writes, given their focus on content consumption, their ability to be tailored to various industries, etc. Garcha believes tablets are a $120 billion industry by 2015, capturing lots of the buying that would otherwise go to low-end PCs.

Garcha sees 65 million tablets being shipped this year, 116 million next year, and 298 million units a year by 2015, numbers that are quite a bit higher than many reports I’ve seen.

As for the stocks,

• Apple should beat expectations this year and next, and has long-term potential based on being the dominant force in tablets, as far as Garcha is concerned. He has a $500 price target on the stock, and he estimates $25.11 per share in EPS this fiscal year that ends in September, and $32.49 next year. That’s quite a bit higher than the Street consensus at $22.98 and $26.32.
• EMC will expand its 26% shares of the storage market, which is set to grow at 10% per year, compounded, through 2015. Continued success in backup and recovery products, in particular, may push EMC’s revenue growth past the 13% per year that the company has forecast. Garcha set a $34 price target.
• HP, will recently set a long-term goal of $7 per share in EPS, should easily hit $6 per share next year, Garcha writes, as there is lots of room for growth in IT services, which are currently “under-consumed” around the world, providing lots of opportunity. But Garcha does advise CEO Apotheker to do three things: engage in an “all-out price war” in networking equipment at the expense of Cisco Systems (CSCO); exit the PC business given its commodity status; “re-invigorate” the company’s software business. Garcha has a $60 price target on the shares.
• As for Dell, the company “needs a transformation” to an enterprise company as the PC business declines. And though he acknowledges the company is working to become more of an enterprise shop, “the issue is that this will involve M&A in the software, services and storage areas,” writes Garcha. “Here, not only is the current track record mixed, but the company will also need to compete for targets with peers such as IBM, HP, Oracle (ORCL) and Cisco that have deeper pockets.”

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Chip maker Nvidia (NVDA) tomorrow hosts its annual analyst day with the Street, and a few analysts today are offering a curtain raiser, though from my casual observation, it would seem the bears are out in force ahead of the bulls this morning. I will keep my eyes peeled for most positive notes.

Auriga’s Daniel Berenbaum, who is firmly in the Intel (INTC) camp, as is clear from his note on semis this morning, reiterates a Hold recommendation on Nvidia shares and a $19 price target.

He points out that the company’s announced design wins for its “Tegra” processor for tablets mean that “Nvidia will be beholden to the popularity of its customers’ products more so than Tegra’s performance” and that this “makes it difficult to gauge the real ramp here.”

Berenbaum is referring to products such as Motorola Mobility’s (MMI) “Atrix” smartphone, which has gotten favorable reviews (including in Barron’s), and, on the other hand, the Dell (DELL) “Streak,” one of the least loved tablet computers to date.

Berenbaum is modeling $400 million in Tegra revenue this year: “We assume that Tegra will gain 5% share of the 400mln unit smartphone market in 2011 with an ASP of $12 and half of the non-iPad tablet market of 16 million units with an average selling price of $20.”

As for the other parts of the business, its “Tesla” high-end processors for supercomputing applications, it is “highly dependent on partners – sales are expected to ramp as NVDA works with system designers.”

Nvidia still enjoys the “lion’s share” of the market for discrete GPUs, but the PC market “isn’t on fire,” Berenbaum points out, while AMD (AMD) “seems to be in somewhat of a better position in GPU than it has been for the past six months.”

Meantime, UBS’s Uche Orji writes today that the company’s gross profit has been driven by its standalone GPUs (GeForce) and its “professional solutions business” division, which includes graphics products for workstation-class computers, as well as Tesla.

Opines Orji, “this relationship more recently has decoupled on both structural concerns and prospects for Tegra apps processors.” By which he means that the stock is no longer responding to the gross profit increases, rather, it seems pre-occupied with how the Tegra chip will fare in the tablet wars:

Analyst meeting is likely to highlight its increasing shift to a computing-centric from a graphics-centric company; while we are optimistic its computing efforts in its Professional Solutions business (Tesla) can materially contribute towards PSB reaching $1bn in F2012, we are concerned intense competition vs its Tegra apps processors (vs no major PSB competition) could limit its ability to exceed (or even meet) its $400-600m F12 Tegra guidance.

On the other hand, Caris & Co.’s Craig Ellis, while only at Average on the stock, offers some more upbeat remarks. He expects the company will lay out a plan to get gross profit margin to the low 50% range from around the high 40s at present. He also writes that designs wins for Tegra at LG Electronics (LGERF), Motorola, Samsung (SSNLF), and white box makers “have surprised the Street after 2009’s Microsoft (MSFT) OS bet bust.”

Still, Ellis writes, concerns about a rocky macro-economic environment, and the prospect of a tablet “correction” in the second half of the year, “could lend 10-20% downside share risk, near term, barring evidence tablet 1.0 market share translates into Tablet 2.0 gains.”

Nvidia shares are down 62 cents, or 3%, at $20.13.

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Collins Stewart’s Lou Miscioscia today writes that market research firm Gartner’s reduction in its PC growth forecast, announced yesterday, is no surprise, given the evident weakness in consumer PC buying.

Gartner cut its PC growth estimate this year by a third, to 10.5% PC unit growth. That’s in line, writes Miscioscia, with the 10% to 11% range he was already modeling.

Regarding Hewlett-Packard (HPQ), which last week reported disappointing PC sales, Miscioscia expects the company to see just 2% growth this year in its “Personal Systems Group” that contains PC sales.

“Our 2% revenue growth estimate could prove conservative and one additional x-factor is the success (or lack thereof) of HP’s WebOS tablet launch later in the year,” writes Miscioscia. He maintains a Buy recommendation on HP shares.

As for Dell (DELL), “we model 6% total PC revenue growth with 4% desktop revenue growth and 8% notebook revenue growth. With Dell’s greater enterprise mix we are comfortable with our current estimates for the year.” Miscioscia has a Neutral rating on Dell.

HP shares today are down 35 cents, or 0.8%, at $42.85. Dell shares are down 20 cents, or 1.3%, at $15.52.

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After JP Morgan hardware analyst Mark Moskowitz today cut his estimates for PC sales this year and next, thanks to threats from slowing growth in China and the incursion of tablet computers, his colleague Christopher Danely wrote that Intel (INTC) could “be at risk of missing” its Q1 forecast for $11.3 billion to $12.1 billion, by which he seems to mean the mid-point of that forecast, $11.7 billion, because of the lower PC estimate.

In fact, Danely is modeling just $11.3 billion for the quarter. In addition to Moskowitz’s research, he cites the most recent reports of Hewlett-Packard (HPQ), Dell (DELL), Acer and Lenovo, all of whom either missed the consensus or the expected seasonal sales rate in Q4, or else forecast Q1 below consensus or the seasonal pattern of sales.

Danely notes that three of the largest notebook original design manufacturers have cut their forecasts for the current quarter, citing “order push-outs.”

With Intel having reported Q4 days of inventory of 94, up 11 days from Q3, Danely thinks the company needs to lower utilization rates and inventory.

I would note that Intel today is speaking at Morgan Stanley’s Technology, Media & Telecom conference, so it will be interesting to hear what management has to say about PCs, servers, etc. More on that later.

Intel shares today are down 29 cents, or 1.3%, $21.57.

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Coming up next, after the bell, earnings reports from Hewlett-Packard (HPQ) and RadioShack (RSH).

For its fiscal Q1 ending in January, HP is expected to earning $1.29 per share on revenue of $32.96 billion. Analysts are forecasting $32.6 billion for the fiscal Q2, and earnings per share of $1.25.

ISI Group analyst Abhey Lamba writes that strength in HP’s enterprise business likely offset the company’s exposure to weak consumer buying trends. The company may also have seen a benefit from favorable pricing on components (as Dell (DELL) did when it announced results last week), and from strength in pricing for its x86-based servers. Lamba reiterated a Buy rating and a $54 price target on the shares.

Radio Shack may report EPS of 53 cents on revenue of $1.37 billion in its Q4 ended in December, according to consensus. For the current Q1, the Street is looking for $1.07 billion in revenue and 38 cents EPS.

HP shares are down 69 cents, or 1.4%, at $47.98. RadioShack shares are off 37 cents, or 2.4%, at $15.33.

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Shares of Dell (DELL) are up $1.40, or 10%, at $15.31, after better-than-expected Q4 earnings results last night and a forecast for better-than-expected revenue growth this year.
On a conference call with analysts last night, management told the Street its services business has transformed the company, but that it still expects [...]

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During a conference call with analysts tonight, Dell (DELL) CFO Brian Gladden reiterated the company’s contention that it has no intention of going private, after pointing out that reported GAAP profit per share for the fiscal Q4 ending in January of 48 cents was the highest quarterly profit in the [...]

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