EQUITY RESEARCH Technology | U.S. IT Hardware | 27 February 2012

Stock Rating 1-OVERWEIGHT APPLE, INC. Unchanged Dividend A Hot Topic at Shareholder Sector View 2-NEUTRAL Unchanged

Meeting, Remains a Potential Catalyst Price Target USD 630.00 Unchanged We continue to believe Apple’s market cap can see further gains as it extracts more profits out of the traditional PC and mobile phone industries. Reiterate 1-Overweight. Price (27-Feb-2012) USD 525.76 Potential Upside/Downside +20%  Tim Cook leads his first shareholder meeting: On Thursday (2/23), Apple held its Tickers AAPL annual shareholder meeting. During the meeting CEO Tim Cook addressed

questions and concerns from investors ranging from a potential dividend to the Market Cap (USD mn) 487079 way the company elects its directors. We believe the Board faces an interesting Shares Outstanding (mn) 932.37 decision over the next year regarding its growing cash hoard (now at over $97.6 Free Float (%) 99.88 bn). We continue to believe Apple has the ability to easily pay a dividend with a 52 Wk Avg Daily Volume (mn) 16.5 significant yield (2% range) and could be instated by calendar year end. Dividend Yield (%) N/A Return on Equity TTM (%) 45.58  Apple’s influence felt at Mobile World Congress as competition unveils new Current BVPS (USD) 96.60 phones: The Mobile World Congress (MWC) started today in Barcelona. While Source: FactSet Fundamentals Apple is not attending, the conference will likely focus on many themes pertinent to Apple and the potential iPhone 5. We continue to believe that Apple will ship a Price Performance Exchange-Nasdaq 52 Week range USD 528.50-310.50 new iPhone in C2H12. This iPhone should boast a new design, 4G LTE capabilities, a faster processor, a larger screen, a better camera, an improved Siri and more 600

features that could even include NFC capabilities. 500

 We expect to learn more about trends in NFC at the Barclays Capital Emerging 400 Payments Forum in NYC on 3/28-3/29, hosted by our colleague, Darrin Peller. Last 300 year, Apple’s potential plans for mobile payments were a hot topic of debate along Apr- 11 Ju l - 1 1 Oct- 11 Ja n - 1 2 with the evolution of mobile payments within the smart phone sector. Please Link to Barclays Capital Live for interactive charting contact your Barclays Capital salesperson for details.

AAPL: Quarterly and Annual EPS (USD) U.S. IT Hardware Ben A. Reitzes 2011 2012 2013 Change y/y 1.212.526.9517 FY Sep Actual Old New Cons Old New Cons 2012 2013 [email protected] Q1 6.43A 13.87A 13.87A 13.87A 13.92E 13.92E 13.69E 116% 0.36% BCI, New York

Q2 6.40A 8.95E 8.95E 9.43E 10.51E 10.51E 10.73E 40% 17% Jennifer Thorwart Q3 7.79A 9.00E 9.00E 9.49E 10.63E 10.63E 11.07E 16% 18% 1.617.342.4181 Q4 7.05A 10.71E 10.71E 10.06E 13.40E 13.40E 11.93E 52% 25% [email protected] BCI, New York Year 27.68A 42.52E 42.52E 42.71E 48.46E 48.46E 47.47E 54% 14% P/E 19.0 12.4 10.8 Matthew Markezin-Press Source: Barclays Capital 1.212.526.6180 Consensus numbers are from Thomson Reuters [email protected] BCI, New York

Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 17. Barclays Capital | Apple, Inc.

COMPANY SNAPSHOT

Apple Inc. IT Hardware

Income statement ($mn) 2011A 2012E 2013E 2014E CAGR Revenue 108,249 155,929 183,108 213,607 25.4% Stock Rating 1-OVERWEIGHT EBITDA 35,604 56,959 67,252 77,913 29.8% Sector View 2-NEUTRAL EBIT 33,790 53,254 61,149 69,645 27.3% Price (27-Feb-2012) $525.76 Pre-tax income 34,205 53,871 62,014 70,755 27.4% Price Target $630 Net income 25,922 40,268 46,511 53,420 27.3% Ticker AAPL Reported EPS ($) $27.68 $42.52 $48.46 $54.65 25.5% Diluted shares (m) 937 947 960 978 1.4% Investment case Dividend per share ($) - - - - NA We believe Apple's valuation is attractive & that shares can continue to benefit from strong iPad & Margin and return data (%) Average iPhone demand, Mac share gains, international EBITDA margin 32.9 36.5 36.7 36.5 35.7 expansion & new innovations. We believe Apple EBIT margin 31.2 34.2 33.4 32.6 32.8 deserves a higher multiple vs. the group given our view that it is the best growth story in IT hardware Pre-tax margin 31.6 34.5 33.9 33.1 33.3 over the long term. Net margin 23.9 25.8 25.4 25.0 25.0 ROIC 47.0 43.2 45.2 47.2 45.6 ROA 27.1 27.3 24.3 24.6 25.8 Upside case $675 ROE 41.7 44.1 44.0 51.4 45.3 Apple has solid prospects for high organic growth, with open-ended potential to gain share in phones, Balance sheet and cash flow ($mn) CAGR tablets & Macs. We view Apple’s upside scenario at Tangible fixed assets 63,395 113,241 157,369 216,807 50.7% $675 based on about 14x our FY13 EPS estimate of Intangible fixed assets 2,065 2,065 2,065 2,065 0.0% $48.46. Cash and equivalents 9,815 11,434 12,633 12,527 8.5% Total assets 116,371 178,778 203,750 229,769 25.5% Short and long-term debt - - - - NA Downside case $435 Other long-term liabilities 23,572 33,955 39,873 46,515 25.4% We believe the biggest issues facing the stock Total liabilities 39,756 57,267 67,249 78,450 25.4% include the overall economy, aggressive competition Net debt/(funds) (81,570) (114,839) (160,023) (213,479) NA & very high expectations. We view Apple’s downside Shareholders' equity 76,615 106,210 105,113 102,770 10.3% scenario at $435 based on about 9x our FY13 EPS Change in working capital 5,757 4,066 4,599 4,819 -5.8% estimate of $48.46 (9.5x is Apple’s 5-yr trough multiple). Operating cash flow 37,529 53,184 63,456 73,850 25.3% Capital expenditure (4,260) (8,000) (10,000) (12,500) NA Free cash flow 33,269 45,184 53,456 61,350 22.6% Upside/downside scenarios

$675 Valuation and leverage metrics Average $630 757 (29.2%) P/E (x) 19.0 12.4 10.8 9.6 13.0 (20.5%) 657 $435 EV/EBITDA (x) 13.6 8.5 7.3 6.4 9.0 557 (-16.7%) FCF yield (%) 6.8 9.1 10.6 11.9 9.6 457 Price Upside 357 Case Price/sales (x) 4.5 3.2 2.8 2.4 3.2 Downside Target 257 Case Price/BV (x) 6.4 4.7 4.8 5.0 5.2 157 Dividend yield (%) 0.00.00.00.00.03-Mar-11 24-Feb-12 Total debt/capital (%) 0.00.00.00.00.0 Source: FactSet Selected operating metrics (units in 000) CAGR Geographic Revenue Distribution FY11 Desktops 4,669 5,171 5,152 5,069 2.8% 10 Line item 1 Line item 2 Notebooks 12,066 14,805 18,264 21,955 22.1% APAC Total Macs 16,735 19,976 23,416 27,024 17.3% 8 21% 6 Americas 42,620 33,029 24,697 18,737 -24.0% 35% 72,293 131,137 165,400 207,033 42.0% 4 Retail 32,394 48,905 63,505 79,000 34.6% 2 EMEA 0 13% 26% 2011AJapan 2012E 2013E 2014E 5% Source: Company data, Barclays Capital Note: FY end Sept.

27 February 2012 2 Barclays Capital | Apple, Inc.

The Barclays Capital Apple Monitor – 2/27/12

A quick guide to the Barclays Capital Apple Monitor: The first section discusses the stories and/or our research over the last week that we think are most important for the stock. The second section tracks iPhone activity on Flickr.com to gauge the product’s ability to move up the consumer value chain and cannibalize point & shoot cameras. The third tells readers about weekly PC and Mac sales trends. The fourth shows ship times for major products on Apple.com, which, in our opinion, provides a "common sense" idea of which products are either most popular, capacity-constrained or both. The fifth shows top seller lists from various sources. Week-to-week changes in top seller lists can indicate something about product popularity, consumer buying patterns and competition. And the sixth section tells readers about Apple’s App store, which we believe is one of the biggest differentiators for the iPhone and iPad experience — creating “stickiness” and distinction.

1. Dividend Still a Potential Catalyst Following Shareholder Meeting; Mobile World Congress to Showcase Competition, But Apple’s Presence Looms Tim Cook addresses investor inquiries at annual shareholder meeting

On Thursday (2/23), Apple held its annual shareholder meeting at company headquarters in Cupertino, California. Over the course of the meeting, CEO Tim Cook addressed questions and concerns from investors ranging from a potential dividend to the way the company elects its directors. During the meeting Apple adopted a proposal from The California Public Employees’ Retirement System (CalPERS) that would change the way the company elects its directors. Apple’s directors will now be required to receive a majority of votes in an uncontested election rather than the current requirement of a plurality.

However, a primary focus of the meeting was on how Apple would use its cash balance of over $97.6 billion, or about $104 per share ($64 billion is held overseas). During the meeting CEO Cook stated that the company had been actively considering what to do with its cash balance and that the almost $100 billion cash hoard was more than adequate to run the company. In fact, we estimate that Apple will generate over $45/share in free cash flow in FY12 and $55/share in FY13 – both figures above GAAP EPS given a negative cash conversion cycle and rapid unit growth. In our view, Apple has obviously run out of realistic excuses for hoarding so much cash, but the company is moving along, thoughtfully treating every penny “like it’s their last.” We do believe the Board faces an interesting decision over the next year and continue to believe Apple has the ability to easily pay a dividend with a significant yield (2% range or about $10/share) along with the ability to grow it over time. Furthermore, we believe consistent buybacks could be an option in tandem with a dividend. We believe a short-term accelerated buyback and/or special dividend could provide less long-term value. We still believe a dividend could be instated by calendar year end – a potential catalyst for shares that still lies ahead.

Mobile World Congress kicks off without Apple

The Mobile World Congress (MWC) started today in Barcelona, Spain. While Apple is not attending this year’s conference, we note that the conference will focus on many themes pertinent to Apple and the potential iPhone 5 that we expect to launch by the fall. Furthermore, many of Apple’s competitors are revealing new smartphones. So far HTC, Huawei, Samsung, Nokia and Sony have all announced new phones ranging from high-end models to budget models targeted at emerging markets. As the conference continues we will pay particular attention to offerings from Apple’s chief competitor, Samsung, as well as Nokia’s expansion of its line. Despite Apple’s absence we note that many of

27 February 2012 3 Barclays Capital | Apple, Inc.

those companies participating at this year’s conference are unveiling phones that are aimed at the iPhone 5. The high-end phones unveiled are equipped with a range of features including quad-core processors, high megapixel cameras, high-definition displays and are LTE capable. We continue to believe that Apple will ship a new iPhone in C2H12, likely in late September. This iPhone should boast a new design, fast 4G LTE capabilities, a faster processor, a larger screen, a better camera, an improved Siri and many more features that could even include NFC capabilities.

For more information on trends in near field communications, we would like to remind you that The Barclays Capital Emerging Payments Forum will take place in New York City on 3/28-3/29, hosted by our colleague, Darrin Peller. Last year, Apple’s potential plans for mobile payments were a hot topic of debate along with the overall evolution of mobile payments within the smartphone sector. For an agenda and a list of presenting companies, please contact your Barclays Capital salesperson.

For more information on the Mobile World Congress see the following reports:

 Smart Mobility: Asia Ex-Japan: MWC themes and beyond: 4G smartphones accelerate; Apple and SEC remain dominate

 U.S. Wireless Equipment: Handset Themes for 2012 ahead of MWC

2. Flickr Stats – iPhones Are Becoming the Standard for Photo Sharing

We believe that the iPhone is becoming the digital camera of choice for consumers and enthusiasts given its ease of use and ability to quickly get photos online. This usability helps warrant a premium for the product and creates stickiness that connects consumers with other Apple products. The iPhone 4 is very popular on Flickr, and we believe the iPhone 4S is gaining given its popularity and camera improvements.

Flickr is a leading image hosting website and is used by many photography enthusiasts to host high quality photos. According to Yahoo!, Flickr’s owner, there are over 51 million registered users that upload about 4.5 million photos daily. Flickr is integrated into Apple’s iPhoto for easy uploading and there is a dedicated app available for the iPhone for easy sharing. During Apple’s ‘Let’s Talk iPhone Event’ (10/4/11), which launched the iPhone 4S, Apple’s SVP, Worldwide Marketing, Philip Schiller, noted that the iPhone 4 had become the most popular phone on Flickr, overtaking traditional cameras such as Nikon’s D90 and Canon’s Rebel T2i.

This week the Apple iPhone 4 remained the most popular camera on Flickr.com with 4,603 average daily users as of 2/27/12, declining slightly compared to last week. However, the iPhone 4S’s popularity is rising on Flickr with 2,349 average daily users up from 2,271 last week. In fact, Apple has the 4 most popular camera phones on Flickr, including the iPhone 4, iPhone 3G, iPhone 4S and the iPhone 3GS (see table below).

27 February 2012 4 Barclays Capital | Apple, Inc.

Figure 1: Most Popular Cameras on Flickr.com (Avg. daily users) 1/23 1/30 2/6 2/13 2/21 2/27 1 Apple iPhone 4 4,752 4,711 4,659 4,629 4,607 4,603 3 Canon EOS 5D Mark II 4,017 4,014 4,019 4,032 4,045 4,067 2 Nikon D90 4,119 4,084 4,046 4,028 4,003 4,004 4 Canon EOS REBEL T2i 3,515 3,538 3,557 3,588 3,620 3,655 5 Canon EOS 7D 3,207 3,204 3,211 3,228 3,244 3,271

Source: www.flickr.com/cameras/

Figure 2: Most Popular Cameraphones on Flickr.com (Avg. daily users) 1/23 1/30 2/6 2/13 2/21 2/27 1 Apple iPhone 4 4,752 4,711 4,659 4,629 4,607 4,603 2 Apple iPhone 4S 1,837 1,950 2,052 2,152 2,271 2,349 3 Apple iPhone 3G 1,414 1,312 1,228 1,203 1,185 1,174 4 Apple iPhone 3GS 1,227 1,198 1,168 1,147 1,129 1,118 5 HTC EVO 4G 511 499 488 481 474 470 Source: www.flickr.com/cameras/

3. Weekly PC & Mac Trends – Macs Still Outgrow PCs By Wide Margin According to NPD, for the week of February 12- February 18, Mac unit volumes were up 12.2% y/y vs. the +9.1% y/y reported last week and have grown at a weighted average of +9.8% y/y over the trailing four weeks. We believe Mac sales are still relatively strong even as questions on the PC sector remain, as Apple benefits from new stores in China and strong sales of the MacBook Air. Even though the economy and HDD shortages are concerns that could limit upside, we remain comfortable with our estimate for 15.5% y/y Mac unit growth for C1Q given overseas momentum – especially in China where growth is much higher. China is Apple’s second largest geography by revenue.

With regard to the entire PC market for the week of 2/12/12 to 2/18/12, NPD indicates that total unit sales in the US decreased 18.0% y/y in units (-8.8% y/y in dollar sales) following a -21.0% y/y performance last week and weighted average growth of -17.4% over the trailing four weeks. Results seem to be showing the impact of ongoing HDD shortages, in addition to weak PC fundamentals in general. Notebook units were indicated -20.3% y/y (vs. -23.4% y/y last week and weighted average growth of -19.2% over the previous four weeks), while desktop units are indicated -8.2% y/y (vs. -12.2% y/y last week, and weighted average growth of -10.5% y/y over the previous four weeks).

4. Ship times remain unchanged The iPhone 4S is listed as “In Stock” for the fifth week in a row as ship times for Apple products remain stable. We still believe that demand for the iPhone 4S remains strong and expect a solid C1Q12 for iPhones given overseas demand. Apple had previously included estimated ship times for many of its products. However, as of Friday, September 9, 2011, the Apple online store only provides an “In Stock” designation for most products instead of the previous time-frame estimate. Ship times have remained stable as almost all of the items listed on the Apple online store are listed as “In Stock.” At this time the HDD shortage doesn’t seem to be impacting mainstream Mac shipments.

The Best Buy iPod and iPad availability table below is based on a 40+ store sample, including stores in MA, NY, CA, TX, PA, and WA. The table for Wal-Mart availability below is based on a 106-store sample (we only count stores that are selling each SKU in our analysis) including stores in MA, NY, CA, TX, PA, and WA. Wal-Mart does change the number of

27 February 2012 5 Barclays Capital | Apple, Inc.

stores selling each SKU weekly, meaning the sample is good for trends but not for absolute availability percentages.

In order to give perspective on the evolution of Apple’s product line we now include a chart that documents selected Apple product releases. We include the year of introduction, date of availability as well as the price of the product upon release.

Figure 3: Introduction Timeline of Selected Apple Products

Price @ Year iPhone Release* Date Available 2007 iPhone (4/8GB) $499/599 6/29/07 iPhone (16GB) $499 2/5/08 2008 iPhone 3G (8/16GB Black, 16GB White) $199/299 7/11/08 2009 iPhone 3GS (16/32GB Black, 16/32GB White) $199/299 6/19/09 iPhone 3GS (8GB Black) $99 6/24/10 2010 iPhone 4 GSM (16/32GB Black) $199/299 6/24/10 iPhone 4 GSM (8/16/32GB White, 8GB Black) $99/199/299 4/28/11 (16/32GB White), 10/14/11 (8GB Black/White) 2/10/11 (16/32GB Black), 4/28/11 (16/32GB White), iPhone 4 CDMA (8/16/32GB Black, 8/16/32GB White) $99/199/299 2011 10/14/11 (8GB Black/White) iPhone 4S GSM (16/32/64GB Black, 16/32/64GB White) $199/299/399 10/14/11 iPhone 4S CDMA (16/32/64GB Black, 16/32/64GB White) $199/299/399 10/14/11 Price @ Year iPad Release* Date Available iPad (16/32/64GB WiFi) $499/599/699 4/3/10 2010 iPad GSM (16/32/64GB WiFi + 3G) $629/729/829 4/30/10 iPad 2 (16/32/64GB WiFi Black, 16/32/64GB WiFi White) $499/599/699 3/11/11 iPad 2 GSM (16/32/64GB WiFi + 3G Black, 16/32/64GB $629/729/829 3/11/11 2011 WiFi + 3G White) iPad 2 CDMA (16/32/64GB WiFi + 3G Black, 16/32/64GB $629/729/829 3/11/11 WiFi + 3G White) *Price with service contract where applicable Source: Apple.com, Barclays Capital Equity Research

27 February 2012 6 Barclays Capital | Apple, Inc.

Figure 4: Product Ship Times in Business Days from Apple.com

Nov 28 Dec 5 Dec 12 Dec 19 Jan 3 Jan 9 Jan 17 Jan 23 Jan 30 Feb 6 Feb 13 Feb 21 Feb 27

Shuffle 2GB Updated (Sept 10) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Nano 8GB Updated (Oct11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Nano 16GB Updated (Oct11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Classic 160GB (Sept 09) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Touch 8GB - Black Updated (Oct 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In StockIn Stock Touch 8GB - White (Oct 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Touch 32GB -Black Updated (Oct 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In StockIn Stock Touch 32GB -White (Oct 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Touch 64GB -Black Updated (Oct 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In StockIn Stock Touch 64GB -White (Oct 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPad 2 Black Wi-Fi (Mar 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPad 2 White Wi-Fi (Mar 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPad 2 Black 3G Verizon (Mar 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPad 2 White 3G Verizon (Mar 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPad 2 Black 3G AT&T (Mar 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPad 2 White 3G AT&T (Mar 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 3GS 8GB AT&T (June 2010) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 4 8GB - Black AT&T (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 4 8GB - White AT&T (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 4 8GB - Black Verizon (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 4 8GB - White Verizon (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 4 8GB - Black Sprint (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 4 8GB - White Sprint (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 4 8GB - Black Unlocked (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 4 8GB - White Unlocked (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iPhone 4S 16GB - Black AT&T (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 16GB - White AT&T (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 32GB - Black AT&T (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 32GB - White AT&T (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 64GB - Black AT&T (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 64GB - White AT&T (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 16GB - Black Verizon (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 16GB - White Verizon (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 32GB - Black Verizon (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 32GB - White Verizon (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 64GB - Black Verizon (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 64GB - White Verizon (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 16GB - Black Sprint (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 16GB - White Sprint (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 32GB - Black Sprint (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 32GB - White Sprint (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 64GB - Black Sprint (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 64GB - White Sprint (Oct 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 16GB - Black Unlocked (Nov 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 16GB - White Unlocked (Nov 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 32GB - Black Unlocked (Nov 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 32GB - White Unlocked (Nov 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 64GB - Black Unlocked (Nov 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock iPhone 4S 64GB - White Unlocked (Nov 2011) 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 1-2 Wks 3-5 bd 3-5 bd In Stock In Stock In Stock In Stock In Stock

MacBook Air 11" 64GB (July 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock MacBook Air 11" 128GB (July 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock MacBook Air 13" 128GB (July 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock MacBook Air 13" 256GB (July 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock

MacBook Pro 2.4Ghz 13" (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock MacBook Pro 2.8Ghz 13" (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock MacBook Pro 2.2Ghz 15" (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock MacBook Pro 2.4Ghz 15" (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock MacBook Pro 2.4Ghz 17" (Oct 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock

Mac Mini 2.3 GHz (July 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Mac Mini 2.5 GHz (July 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Mac Mini 2.0 GHz (server) (July 2011) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iMac 21.5" 2.5 $1,199 (May 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iMac 21.5" 2.7 $1,499 (May 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iMac 27" 2.7 $1,699 (May 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock iMac 27" 3.1 $1,999 (May 11) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock

Mac Pro Quad Core $2,499 (Aug 10) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Mac Pro 8 Core $3,499 (Aug 10) In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Mac Pro 12 Core $4,999 (Aug 10) 2-4bd 3-5bd 2-4bd 2-4bd 1-3 Wks 1-3 Wks 1-3 Wks 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd Mac Pro Server $2,999 In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock In Stock Source: Apple.com

27 February 2012 7 Barclays Capital | Apple, Inc.

Figure 5: iPod/iPad Availability at Best Buy Retail Stores:

Best Buy: 28-Nov 5-Dec 12-Dec 19-Dec 3-Jan 9-Jan 17-Jan 23-Jan 30-Jan 6-Feb 13-Feb 21-Feb 27-Feb 8GB Touch Black (4G) 82% 67% 97% 27% 32% 58% 37% 33% 33% 92% 65% 95% 60% 32GB Touch Black (4G) 100% 80% 77% 98% 47% 83% 48% 95% 82% 78% 80% 95% 33% 64GB Touch Black (4G) 93% 77% 88% 93% 58% 82% 73% 53% 52% 83% 48% 63% 0% 8GB Nano Graphite (6G) 100% 83% 78% 63% 32% 42% 50% 40% 63% 77% 60% 55% 32% 16GB Nano Graphite (6G) 68% 58% 58% 60% 15% 53% 40% 55% 65% 37% 33% 78% 13% 160GB Classic Black 67% 50% 83% 48% 48% 62% 33% 50% 33% 33% 48% 87% 30% 16GB iPad 2 Wi-Fi White 78% 42% 58% 32% 63% 50% 47% 77% 77% 62% 92% 93% 93% 16GB iPad 2 Wi-Fi Black 62% 73% 30% 70% 62% 63% 50% 83% 67% 33% 97% 100% 33% Source: BestBuy.com

Figure 6: iPod/iPad Availability at Wal-Mart Retail Stores:

Wal-Mart: 28-Nov 5-Dec 12-Dec 19-Dec 3-Jan 9-Jan 17-Jan 23-Jan 30-Jan 6-Feb 13-Feb 21-Feb 27-Feb 8GB Touch Black (4G) NA 99% 99% 75% 54% 50% 85% 82% 81% 82% 80% 72% 63% 32GB Touch Black (4G) NA 100% 99% 87% 59% 50% 71% 83% 77% 74% 82% 78% 75% 64GB Touch Black (4G) NA 89% 90% 83% N/A N/A N/A N/A N/A N/A N/A N/A N/A 8GB Nano Charcoal (6G) 67% 80% 79% 37% 18% 18% 84% 75% 67% 61% 71% 78% 62% 16GB iPad 2 (Wi-Fi; Black) 94% 99% 100% 98% 71% 60% 46% N/A N/A N/A N/A N/A N/A 32GB iPad 2 (Wi-Fi; Black) 89% 98% 97% 96% 40% 38% 51% 61% 56% 65% 37% 29% 20% 64GB iPad 2 (Wi-Fi; Black) 6% NA 3% 3% 4% 1% 7% N/A N/A N/A 4% 6% 0% 16GB iPad 2 (Wi-Fi; White) 91% 100% 98% 89% 59% 59% 50% N/A N/A N/A N/A N/A N/A 32GB iPad 2 (Wi-Fi; White) 5% 33% 11% 9% 9% 6% 6% 5% 6% 6% 5% 12% 5% 64GB iPad 2 (Wi-Fi; White) 4% NA NA NA 2% 0% 0% N/A N/A N/A 97% 17% 17% Source: Walmart.com

5. Top Sellers – Apple Dealing with Competition from the Kindle Fire Effectively Below we list the weekly trend of the top electronics sold through Amazon.com. As of February 27, 2012, Apple held 8 of the top 10 MP3 player slots, 5 of the top 10 desktops, and 3 of the top 10 notebooks. In PCs, the netbook ASP was $344 this week vs. $350 last week; for comparison the tablet ASP is $326 vs. 323 last week and the top 10 notebook ASP is $749 vs. $942 last week (driven lower by fewer Macs in the top 10). Please see our chart in Figure 13, which shows recent trends in both netbook and tablet ASPs. As expected, the Kindle Fire remains Amazon’s most popular tablet and it began to ship in November. By March, we believe Apple will work a lower-priced iPad into its tablet line-up (perhaps by dropping the price of the iPad 2 when the next iPad becomes available). We note that the difference between the ASP of a top 10 tablet and the ASP of a top 10 netbook has been less than $50 for over two months. We expect PC vendors to prioritize PCs ahead of netbooks given potential for HDD shortages, so we may see higher netbook ASPs over the next several months as a result.

27 February 2012 8 Barclays Capital | Apple, Inc.

Figure 7: Top Electronics on Amazon.com

Top Electronics on Amazon: February 6 February 13 February 20 February 27 1 Kindle Fire $199 Kindle Fire $199 Kindle Fire $199 Kindle Fire $199 2 Kindle Touch W/ Offers $99 Kindle Touch W/ Offers $99 Kindle Touch W/ Offers $99 Kindle Touch W/ Offers $99 3 Kindle W/ Offers $79 Kindle W/ Offers $79 Kindle W/ Offers $79 Kindle W/ Offers $79 4 iPod Touch 8GB Black (4G) $188 Kindle Touch 3G W/ Offers $149 Kindle Touch 3G W/ Offers $149 Kindle Touch 3G W/ Offers $149 5 Kindle Touch 3G W/ Offers $149 iPod Touch 8GB Black (4G) $188 iPod Touch 8GB Black (4G) $188 iPod Touch 8GB Black (4G) $188 6 Kindle Keyboard 3G W/ Offers $139 Kindle Keyboard 3G W/ Offers $139 iPod Touch 8GB White (4G) $188 iPod Touch 8GB White (4G) $188 7 Garmin nuvi 1450LMT $130 iPod Touch 8GB White (4G) $189 Kindle Keyboard 3G W/ Offers $139 Kindle Keyboard 3G W/ Offers $139 8 Apple TV MC572LL/A (2010) $99 Roku 2 XS $90 Motorola SB6121 SURFBoard $80 Motorola SB6121 SURFBoard $69 9 iPod Touch 8GB White (4G) $189 Motorola SB6121 SURFBoard $79 Panasonic DMP-BDT210 $131 Garmin nuvi 1450LMT $140 10 CaseCrown Bold Kindle Fire case $25 Roku 2 XD $70 Garmin nuvi 1450LMT $145 Roku 2 XD $76 11 Motorola SB6121 SURFBoard $85 Garmin nuvi 1450LMT $140 Roku 2 XS $96 Panasonic DMP-BDT210 $139 12 Panasonic DMP-BDT210 $138 Apple TV MC572LL/A (2010) $98 iPod Touch 32GB Black (4G) $273 iPod Touch 32GB Black (4G) $273 13 iPod Touch 32GB Black (4G) $273 iPod Touch 32GB Black (4G) $273 Sony DVP-SR200P/B $30 Roku 2 LT $50 14 Roku 2 XS $98 Panasonic DMP-BDT210 $103 Roku 2 XD $76 Roku 2 XS $96 15 Medialink Wireless N Router $50 TCL L40FHDFTA HDTV $330 LG 42LV4400 $599 Sony DVP-SR200P/B $30 16 Motorola SB5101U SURFBoard $37 Canon PowerShot ELPH 300 $147 Medialink Wireless N Router $50 iPod classic 160 GB black (4G) $229 17 Roku 2 XD $77 Kindle Touch $139 iPod classic 160 GB black (4G) $229 LG BD670 $119 18 Elsse Premium Folio Kindle Fire case $17 iPod classic 160 GB black (4G) $230 Panasonic DMC-FH25K $100 Kindle Touch $139 19 Sony DVP-SR200P/B $30 Sony DVP-SR200P/B $30 Kindle Touch $139 Medialink Wireless N Router $50 20 Kindle Touch $139 Garmin nuvi 1350LMT $110 Kindle Keyboard 3G $189 Panasonic DMP-BD75 $65 21 Canon PowerShot ELPH 300 $149 Medialink Wireless N Router $50 LG BD670 $119 Canon PowerShot ELPH 300 $177 22 iPod classic 160 GB black (4G) $229 Kindle $109 iPod Touch 32GB White(4G) $273 LG 42LV4400 $500 23 Kindle Keyboard 3G $189 iPod 2GB shuffle Silver(4G) $46 Plugable USB 2.0 10 Port Hub $27 iPod Touch 32GB White(4G) $273 24 TCL L40FHDFTA HDTV $330 Kindle Touch 3G $189 Sony ICD-PX312 Recorder $45 Kindle Keyboard 3G $189 25 iPod Touch 32GB White(4G) $275 Kindle Keyboard 3G $189 TCL L40FHDFTA HDTV $330 Kindle $109 Source: Amazon.com

Figure 8: Top Tablets on Amazon.com

Top 10 Tablets on Amazon: February 6 February 13 February 20 February 27 1 Kindle Fire $199 Kindle Fire $199 Kindle Fire $199 Kindle Fire $199 2 MID 7" VIA 8650 $69 ASUS Transformer Prime TF201-B1-GR $589 Samsung Galaxy Tab 10.1"32GB $469 ASUS Transformer Prime TF201-B1-GR $565 3 Coby Kyros $90 Coby Kyros $94 ASUS Transformer Prime TF201-B1-GR $580 Samsung Galaxy Tab 10.1"32GB $470 4 ASUS Eee Pad Transformer TF101-A1 $350 Samsung Galaxy Tab 10.1"32GB $470 Coby Kyros $95 Coby Kyros $93 5 Apple iPad 2 16GB Wifi Wt $496 Blackberry Playbook 16GB $207 Blackberry Playbook 16GB $210 Apple iPad 2 16GB Wifi Wt $450 6 Samsung Galaxy Tab 10.1"16GB $448 Apple iPad 2 16GB Wifi Bk $490 Le Pan TC 970 $199 Le Pan TC 970 $199 7 Apple iPad 2 16GB Wifi Bk $495 Samsung Galaxy Tab 10.1"16GB $442 Apple iPad 2 16GB Wifi Wt $498 Apple iPad 2 16GB Wifi Bk $486 8 Le Pan TC 970 $200 MID 7" VIA 8650 $73 Apple iPad 2 16GB Wifi Bk $488 Samsung Galaxy Tab 16GB $400 9 Blackberry Playbook 16GB $226 ASUS Eee Pad Transformer TF101-A1 $392 Toshiba Thrive 16GB $400 Zeepad 7" Tablet $78 10 Apple iPad 2 32GB Wifi Bk $590 Le Pan TC 970 $199 Zeepad 7" Tablet $90 HP TouchPad 32GB $320 Source: Amazon.com

Figure 9: Top Notebooks on Amazon.com

Top 10 Notebooks on Amazon: February 6 February 13 February 20 February 27 1 MacBook Pro MD313LL/A $1130 MacBook Pro MD313LL/A $1139 MacBook Pro MD313LL/A $1129 MacBook Pro MD313LL/A $1139 2 MacBook Air MC965LL/A $1235 Toshiba Satellite L755-S5349 $500 MacBook Air MC965LL/A $1235 HP g6-1d60us $437 3 Toshiba Satellite L755-S5349 $500 MacBook Air MC965LL/A $1235 Toshiba Satellite L755-S5349 $500 MacBook Air MC965LL/A $1220 4 MacBook Pro MD318LL/A $1710 HP g6-1d60us $432 ASUS A53U-ES21 $400 Toshiba Satellite L755-S5349 $500 5 MacBook Air MC966LL/A $1500 MacBook Pro MD318LL/A $1710 MacBook Pro MD318LL/A $1710 HP g7-1310us $547 6 MacBook Air MC969LL/A $1134 HP g7-1310us $574 HP g6-1d60us $429 MacBook Pro MD318LL/A $1710 7 MacBook Air MC968LL/A $940 Sony Vaio EL2 VPCEL22FX/N $470 HP g7-1310us $510 HP dv6-6c10us $550 8 Sony Vaio EL2 VPCEL22FX/N $470 Acer AS5733Z-4469 $432 MacBook Air MC969LL/A $1140 Dell D620 (used) $158 9 ASUS Zenbook UX31E-DH52 $1057 MacBook Air MC968LL/A $940 MacBook Air MC968LL/A $940 Acer Aspire AS5349-2899 $357 10 Acer Aspire S3-951-6646 $800 MacBook Air MC966LL/A $1500 MacBook Pro MD314LL/A $1425 ASUS N53SV-EH72 $870 Source: Amazon.com

27 February 2012 9 Barclays Capital | Apple, Inc.

Figure 10: Top Desktops on Amazon.com

Top 10 Desktops on Amazon: February 6 February 13 February 20 February 27 1 Mac Mini MC815LL/A $569 Mac Mini MC815LL/A $569 Mac Mini MC815LL/A $569 Mac Mini MC815LL/A $569 2 iMac MC309LL/A $1133 iMac MC309LL/A $1133 iMac MC309LL/A $1133 iMac MC309LL/A $1133 3 iMac MC813LL/A $1598 iMac MC813LL/A $1598 iMac MC813LL/A $1598 iMac MC813LL/A $1608 4 Dell Inspiron i570-9114BK $380 Mac Mini MC816LL/A $763 HP Pavilion P6-2100 $380 Mac Mini MC816LL/A $763 5 Dell GX620 (used) $110 Dell Inspiron i570-9114BK $400 Mac Mini MC865LL/A $763 Dell GX620 (used) $116 6 Mac Mini MC816LL/A $763 iMac MC814LL/A $1895 Dell Optiplex (used) $157 Dell Inspiron i570-9114BK $400 7 Dell 745 (used) $158 Dell GX620 (used) $123 Dell GX620 (used) $116 Dell Optiplex $500 8 HP TouchSmart 520-1030 $700 Dell Optiplex (used) $158 Mac Mini MC936LL/A $995 HP Pavilion p6-2100 $380 9 iMac MC814LL/A $1895 Acer AR3700-U3002 $376 iMac MC814LL/A $1895 iMac MC814LL/A $1895 10 Acer AR3700-U3002 $376 Dell Inspiron i620-1298BK $500 Acer AR3700-U3002 $380 Dell Optiplex 745 $185 Source: Amazon.com

Figure 11: Top MP3 Players on Amazon.com

Top 10 MP3 Players on Amazon: February 6 February 13 February 20 February 27 1 iPod Touch 8GB Black (4G) $188 iPod Touch 8GB Black (4G) $188 iPod Touch 8GB Black (4G) $188 iPod Touch 8GB Black (4G) $188 2 iPod Touch 8GB White (4G) $189 iPod Touch 8GB White (4G) $190 iPod Touch 8GB White (4G) $188 iPod Touch 8GB White (4G) $188 3 iPod Touch 32GB Black (4G) $273 iPod Touch 32GB Black (4G) $273 iPod Touch 32GB Black (4G) $273 iPod Touch 32GB Black (4G) $273 4 iPod classic 160 GB black (4G) $229 iPod classic 160 GB black (4G) $230 iPod classic 160 GB black (4G) $229 iPod classic 160 GB black (4G) $229 5 iPod Touch 32GB White(4G) $275 iPod 2GB shuffle Silver(4G) $46 iPod Touch 32GB White(4G) $273 iPod Touch 32GB White(4G) $273 6 iPod 16GB nano graphite (6G) $140 iPod 16GB nano graphite (6G) $140 iPod 16GB nano graphite (6G) $140 iPod 16GB nano graphite (6G) $140 7 iPod 2GB shuffle Silver(4G) $46 iPod Touch 32GB White(4G) $275 iPod 2GB shuffle Silver(4G) $46 iPod 2GB shuffle Silver(4G) $46 8 SanDisk SDMX22-004G-A57K $40 SanDisk SDMX22-004G-A57K $40 iPod 8GB nano graphite (6G) $120 iPod 8GB nano graphite (6G) $120 9 iPod 8GB nano graphite (6G) $122 iPod 8GB nano graphite (6G) $122 SanDisk SDMX22-004G-A57K $40 SanDisk SDMX22-004G-A57K $40 10 SanDisk Sansa Clip+ 4GB Black $35 iPod classic 160 GB silver (4G) $230 SanDisk Sansa Clip+ 4GB Black $35 SanDisk Sansa Clip+ 4GB Black $35 Source: Amazon.com

Figure 12: Top Netbooks on Amazon.com

Top 10 Netbooks on Amazon: February 6 February 13 February 20 February 27 1 Dell Inspiron IM1018-AMZBLK $250 Dell Inspiron IM1018-AMZBLK $250 Acer AO722-0473 $388 Acer AO722-0472 $330 2 Acer AODAO722-0473 $400 Acer AO722-0473 $396 ASUS 1011PX-MU27-BK $300 Acer AO722-0473 $382 3 Toshiba NB505-N508BL $400 Acer AO722-0667 $392 Acer AO722-0472 $345 HP Mini 210-4150NR $306 4 Acer AOD722-0667 $410 Toshiba NB505-N508BL $437 Acer AO722-0667 $379 ASUS 1011PX-MU27-BK $300 5 HP Mini 210-3070NR $400 PINK NETBOOK (Android) $130 HP Mini 210-4150NR $328 Acer AO722-0667 $375 6 Acer Happy2-13666 $340 ASUS 1015PX-SU17-RD $400 BLACK NETBOOK (Android) $130 Acer AOD270-1679 $280 7 HP Mini 110-3830NR $350 Acer AO722-0474 $420 Toshiba NB505-N508BL $437 ASUS EeePC Meego $220 8 ASUS EeePC $210 Toshiba NB305-N600 $370 Toshiba NB305-N600 $369 ASUS 1001PXD-EU17-BK $390 9 Acer AOD722-BZ454 $400 ASUS 1011PX-MU27-BK $300 Dell Inspiron IM10128-AMZBLK $N/A Toshiba NB505-N508BL $460 10 ASUS 1215-PU27-RD $484 ASUS EeePC Meego $212 ASUS 1016PT-BU37-BK $475 ASUS 1015PX-SU17-RD $400 Source: Amazon.com

27 February 2012 10 Barclays Capital | Apple, Inc.

Figure 13: Amazon Top 10 Netbook & Tablet ASP Weekly Trend (Average ASP of top 10 Netbooks/Tablets for sale)

$450

$400

$350

$300

$250

$200

0 7 1 9 7 0 r 5 1 3 1 er 14 2 19 y 3 23 er b er er ar y y 13 ber 24 ber mbe uary ar ob o mber 28 mb nu n uary ru ctober 31 ember 12 Ja Ja n October 3 vemb vem ve ece c JanuaryJanuar Ja February 6 Oct OctoberOct 17 O Novem o o o D ece Feb FebruaryFebruary 20 27 N N N De D

Netbook Tablet

Source: Barclays Capital & Amazon.com

6. Apps a Differentiator for Apple vs. Peers over the Long Term: We believe the App Store remains a key differentiating factor for Apple’s iPhone, iPad and iPod Touch vs. Android and other platforms. This software strategy enables a distinctive “stickiness,” which should enhance customer loyalty/retention over the long term as “apps” personalize devices to levels that competitive imitations cannot match. Also, the use and purchase of apps over cellular networks ensures that iPhones retain relatively high usage characteristics, leading to the purchase of data plans that drive high subsidies from carriers (which equals high margins for Apple over time).

On 10/4/11, Apple announced that over 18 billion apps have been downloaded from its App Store. Back on 7/7/11, Apple announced it had hit 15 billion downloads and the company announced it hit 14 billion downloads on 6/6/11. On 1/24/12, Apple stated that there are more than 550K total apps available for download including over 170K native for the iPad. Apple also stated on 1/24/12 that there have been over 315 million iOS device sales, a sizeable increase from the 250 million cumulative iOS device sales announced on 10/4/11. The company also announced on 1/24/12 that there had been over 600,000 downloads of iBooks Author since the App was announced on 1/19/12 and over 3 million copies of the iTunes U app have been downloaded. Apple also announced on 2/16/12 that 100 million customers have signed up for iCloud compared to 85 million on 1/24/12. We believe iCloud is a major driver of App store loyalty given it allows customers to purchase Apps on one iOS device and use it on others. Also, on 1/24/12 Apple announced that 100

27 February 2012 11 Barclays Capital | Apple, Inc.

million Apps have been downloaded from the Mac App Store in less than one year. Apple has paid developers more than $4 billion since the App Store inception. Also, in February a countdown appeared on Apple.com advertising the approach to 25 billion app downloads. In comparison, the BlackBerry App World has over 60,000 apps with about 174 million downloaded each month. Since its inception, BlackBerry App World has had over 2 billion downloads to date.

27 February 2012 12 Barclays Capital | Apple, Inc.

Figure 14: Apple App Store & Android Market Milestones

Android Market iOS App Store

2Q08

App Store opens 7/11/08 App Store reaches 10M downloads 7/14/08 Android Market announced 8/28/08 3Q08

Android Market opens 10/22/08 App Store reaches 200M downloads 10/22/08 4Q08

1Q09

App Store reaches 1B downloads 4/24/09 2Q09

App Store reaches 1.5B+ downloads 7/14/09 3Q09 App Store reaches 2B+ downloads 9/28/09

4Q09

App Store reaches 3B+ downloads 1/5/10 1Q10

App Store reaches 4B+ downloads 4/8/10

2Q10 App Store reaches 5B+ downloads 6/7/10

Android Market reaches 1B downloads 3Q10

App Store reaches 7B+ downloads 10/20/10 4Q10

App Store reaches 10B+ downloads 1/22/11 1Q11

Android Market reaches 3B+ downloads 4/14/11 2Q11 App Store reaches 14B+ downloads 6/6/11

App Store reaches 15B+ downloads 7/7/11 Android Market reaches 6B+ downloads 7/14/11 3Q11

App Store reaches 18B+ downloads 10/4/11 4Q11 Android Market reaches 10B+ downloads 12/2011 Android Market reaches 11B downloads 1/19/12 Countdown to 25B downloads begins 2/2012 1Q12

Source: Barclays Capital Estimates, Company Reports

27 February 2012 13 Barclays Capital | Apple, Inc.

Figure 15: Top iPhone Apps

Top 10 Paid Apps 2/13 2/21 2/27 1 Ragdoll Blaster 3 $0.99 Grand Theft Auto: Chinatown Wars $0.99 The Night Sky $0.99 2 THE GAME OF LIFE Classic Edition $0.99 Temple Guns™ $0.99 Doodle Jump $0.99 3 Ice Rage $0.99 Clear $0.99 Midway Arcade $0.99 4 Camera+ $1.99 Ragdoll Blaster 3 $0.99 Munch Time $0.99 5 Tank Hero $0.99 THE GAME OF LIFE Classic Edition $0.99 Draw Something $0.99 6 Real Steel $0.99 Camera+ $1.99 Dot Lock Protection Pro $0.99 7 Scramble With Friends $0.99 Tank Hero $0.99 Ragdoll Blaster 3 $0.99 8 NBA JAM by EA SPORTS™ $0.99 Real Steel $0.99 THE GAME OF LIFE Classic Edition $0.99 9 Free Music Download Pro Plus $0.99 Scramble With Friends $0.99 Camera+ $1.99 10 Bejeweled $0.99 NBA JAM by EA SPORTS™ $0.99 Tank Hero $0.99

Top 10 Free Apps 2/13 2/21 2/27 1 RunStickRun! Move the Box Hidden Objects: Gardens of Time 2 Monster Shooter MONOPOLY Hotels MediaBurner 3 Live Wallpapers™ Free Contract Killer Blosics Free 4 Fish Tales™ Flashlight MegaJump 5 Parking Mania Free Toca Hair Salon Mafia Rush™ 6 Battlefield 3™: Aftershock Sports Illustrated Swimsuit 2012 Police Chase Smash 7 Sketch Me! Arms Cartel Small Street 8 Temple Run RunStickRun! Draw Something Free 9 Save The Pencil Live Wallpapers™ Free Cut the Rope: Experiments Free 10 Dot Lock Protection Sketch Me! Cake Pop Maker

Top Grossing Apps 2/13 2/21 2/27 1 Sleep Cycle Alarm Clock $0.99 MONOPOLY Hotels FREE Draw Something $0.99 2 Ragdoll Blaster 3 $0.99 Dream Heights FREE Midway Arcade $0.99 3 Minecraft - Pocket Edition $6.99 Sports Illustrated Swimsuit 2012 FREE Move the Box FREE 4 Scramble With Friends $0.99 Zhang Shang San Guo FREE MONOPOLY Hotels FREE 5 Pandora Radio FREE Camera+ $1.99 Dream Heights FREE 6 Temple Run FREE Minecraft - Pocket Edition $6.99 Minecraft - Pocket Edition $6.99 7 Slotomania FREE Scramble With Friends $0.99 Scramble With Friends $0.99 8 Modern War FREE Pandora Radio FREE Temple Run FREE 9 Battle Nations FREE Grand Theft Auto 3 $0.99 Family Feud® & Friends FREE 10 Poker by Zynga FREE Temple Run FREE Slotomania FREE Source: Apple.com

27 February 2012 14 Barclays Capital | Apple, Inc.

Figure 16: Top iPad Apps

Top Paid iPad Apps 2/13 2/21 2/27 1 SCRABBLE for iPad $4.99 Write My Name $1.99 Adobe Photoshop Touch $9.99 2 Star Wars Pit Droids $1.99 Little Acorns $0.99 The Night Sky $0.99 3 Eufloria $4.99 Grand Theft Auto: Chinatown Wars HD $0.99 Draw Something $0.99 4 Ragdoll Blaster 3 HD $2.99 Pizza Vs. Skeletons $2.99 Pinterest it $0.99 5 Food Network In the Kitchen $1.99 Minecraft - Pocket Edition $6.99 Sticky Sheep™ $0.99 6 Tweetbot $2.99 SCRABBLE for iPad $0.99 The Sims™ Medieval for iPad $2.99 7 Beat Hazard Ultra $0.99 Real Steal $0.99 Color Splash for iPod $1.99 8 Lost in the City HD $2.99 MONOPOLY for iPad $0.99 Midway Arcade $0.99 9 Numbers $9.99 Kingdom Rush™ $0.99 Toca House $1.99 10 Keynote $9.99 Numbers $9.99 Procreate $0.99

Top Free iPad Apps 2/13 2/21 2/27 1 GRAMMY Live Converter Touch HD Hidden Objects: Gardens of Time 2 ThreeColor HD Cut The Rope: Experiments HD Free Police Chase Smash 3 Skype for iPad Britannica Kids: US Presidents Draw Something Free 4 Temple Run Cooking Dash Mafia Rush™ 5 Sherlock Holmes and the Hound of Baskervilles… Fruit Ninja HD Lite Wind-up Knight 6 Farmkill The Week Magazine US Cut the Rope: Experiments HD Free 7 Pinball Arcade Free MONOPOLY Hotels Fruit Ninja HD Lite 8 Line Birds HD City Friends HD MONOPOLY Hotels 9 Battlefield 3™: Aftershock Journey of Hope HD City Friends HD 10 Angry Birds HD Free Fairway Solitaire HD Rat Builder HD

Top Grossing iPad Apps 2/13 2/21 2/27 1 Sherlock Holmes and the Hound of Bask… FREE Fairway Solitaire HD FREE Midway Arcade $0.99 2 Ragdoll Blaster 3 HD $2.99 Quickoffice Pro HD $19.99 Fairway Solitaire HD FREE 3 Quickoffice Pro HD $19.99 TurboTax 2011 FREE Quickoffice Pro HD $19.99 4 TurboTax 2011 FREE Slotomania HD FREE TurboTax 2011 FREE 5 Slotomania HD FREE Temple Run FREE Slotomania HD FREE 6 Temple Run FREE Mystery Manor: Hidden Adventure FREE Temple Run FREE 7 Mystery Manor: Hidden Adventure FREE The Sims™ FreePlay FREE Mystery Manor: Hidden Adventure FREE 8 The Sims™ FreePlay FREE Modern War FREE The Sims™ FreePlay FREE 9 Modern War FREE Slotomania FREE Modern War FREE 10 Slotomania FREE Battle Nations FREE Slotomania FREE Source: Apple.com

27 February 2012 15 Barclays Capital | Apple, Inc.

Figure 17: Top Mac Apps

Top Paid Mac Apps 2/13 2/21 2/27 1 Star Wars®: Knights of the Old Republic® $14.99 iPhoto $14.99 Where's Waldo?™ The Fantastic Journey $0.99 2 GarageBand $14.99 Angry Birds $4.99 Sid Meier's Civilization® IV: Colonization $4.99 3 Aperture $79.99 4 Elements II (Premium) $6.99 OS X Lion $29.99 4 Wikibot $2.99 iMovie $14.99 Pages $19.99 5 Moneywall $23.99 AirAttack $0.99 Cut the Rope $4.99 6 Gemeni: The Duplciate Finder $4.99 Osfoora for Twitter $4.99 FaceTime $0.99 7 GrowlTunes $1.99 Final Cut Pro $299.99 Keynote $19.99 8 CameraBag2 $18.99 DEVONsphere Express $4.99 Numbers $19.99 9 LIMBO $9.99 Unstoppable Gorg $4.99 iPhoto $14.99 10 Magic Window $2.99 9mm© $0.99 Angry Birds $4.99

Top Free Mac Apps 2/13 2/21 2/27 1 NotesTab Xcode TurboCollage 2 Translator Translate with Voice Pool! Screensaver + free 3 Farmscapes Collector's Edition NotesTab Wake Up Time 4 Lep's World Farmscapes Collector's Edition CCleaner 5 Red Crucible 2 Lep's World Picture Collage Maker Lite 6 iBooks Author Red Crucible 2 Xcode 7 N/A iBooks Author Pool! 8 Fun Booth Clean Genius Pro NotesTab 9 Texas Poker Texas Poker Red Crucible 2 10 FreeMemory Gutterball iBooks Author

Top Grossing Mac Apps 2/13 2/21 2/27 1 MoneyWell $23.99 Gemini: The Duplicate Finder $9.99 Visible Body 3D Human Anatomy Atlas $59.99 2 CameraBag 2 $18.99 CameraBag 2 $18.99 Cut the Rope $4.99 3 Quicken Essentials for Mac $49.99 Quicken Essentials for Mac $49.99 Gemini: The Duplicate Finder $9.99 4 Tropico 3: Gold Edition $5.99 Tropico 3: Gold Edition $34.99 Quicken Essentials for Mac $49.99 5 Logic Pro $199.99 Logic Pro $199.99 Logic Pro $199.99 6 Adobe Photoshop Elements 10 Editor $79.99 Adobe Photoshop Elements 10 Editor $79.99 Adobe Photoshop Elements 10 Editor $79.99 7 1Password $49.99 1Password $49.99 Final Draft 8 $199.99 8 OmniGraffle Pro $199.99 AutoCAD LT $899.99 Civilization IV $4.99 9 AutoCAD LT $899.99 OS X Lion $29.99 1Password $49.99 10 OS X Lion $29.99 Final Cut Pro $299.99 AutoCAD LT $899.99 Source: Apple.com

27 February 2012 16 Barclays Capital | Apple, Inc.

ANALYST(S) CERTIFICATION(S) I, Ben A. Reitzes, hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.

IMPORTANT DISCLOSURES CONTINUED

For current important disclosures, including, where relevant, price target charts, regarding companies that are the subject of this research report, please send a written request to: Barclays Capital Research Compliance, 745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to http://publicresearch.barcap.com or call 1-212-526-1072. The analysts responsible for preparing this research report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by investment banking activities. Analysts regularly conduct site visits to view the material operations of covered companies, but Barclays Capital policy prohibits them from accepting payment or reimbursement by any covered company of the their travel expenses for such visits. In order to access Barclays Capital's Statement regarding Research Dissemination Policies and Procedures, please refer to https://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html. Barclays Capital produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, or otherwise. Primary Stocks (Ticker, Date, Price) Apple, Inc. (AAPL, 27-Feb-2012, USD 525.76), 1-Overweight/2-Neutral Guide to the Barclays Capital Fundamental Equity Research Rating System: Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2-Equal Weight or 3-Underweight (see definitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (the "sector coverage universe"). In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3- Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone. Stock Rating 1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. 2-Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12- month investment horizon. 3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. RS-Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or to comply with applicable regulations and/or firm policies in certain circumstances including when Barclays Capital is acting in an advisory capacity in a merger or strategic transaction involving the company. Sector View 1-Positive - sector coverage universe fundamentals/valuations are improving. 2-Neutral - sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating. 3-Negative - sector coverage universe fundamentals/valuations are deteriorating. Below is the list of companies that constitute the "sector coverage universe": U.S. IT Hardware 3D Systems Corp. (DDD) Apple, Inc. (AAPL) Dell Inc. (DELL) EMC Corp. (EMC) Hewlett-Packard (HPQ) IBM Corp. (IBM) Ingram Micro Inc. (IM) Lexmark International (LXK) NetApp, Inc. (NTAP) Seagate Technology (STX) Tech Data Corp. (TECD) Western Digital Corp. (WDC) Xerox Co. (XRX)

Distribution of Ratings: Barclays Capital Inc. Equity Research has 2223 companies under coverage.

27 February 2012 17 Barclays Capital | Apple, Inc.

IMPORTANT DISCLOSURES CONTINUED 42% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 53% of companies with this rating are investment banking clients of the Firm. 42% have been assigned a 2-Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 48% of companies with this rating are investment banking clients of the Firm. 13% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 39% of companies with this rating are investment banking clients of the Firm. Guide to the Barclays Capital Price Target: Each analyst has a single price target on the stocks that they cover. The price target represents that analyst's expectation of where the stock will trade in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst's price target over the same 12-month period. Barclays Capital offices involved in the production of equity research: London Barclays Capital, the investment banking division of Barclays Bank PLC (Barclays Capital, London) New York Barclays Capital Inc. (BCI, New York) Tokyo Barclays Capital Japan Limited (BCJL, Tokyo) São Paulo Banco Barclays S.A. (BBSA, São Paulo) Hong Kong Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong) Toronto Barclays Capital Canada Inc. (BCC, Toronto) Johannesburg Absa Capital, a division of Absa Bank Limited (Absa Capital, Johannesburg) Mexico City Barclays Bank Mexico, S.A. (BBMX, Mexico City) Taiwan Barclays Capital Securities Taiwan Limited (BCSTW, Taiwan) Seoul Barclays Capital Securities Limited (BCSL, Seoul) Mumbai Barclays Securities (India) Private Limited (BSIPL, Mumbai) Singapore Barclays Bank PLC, Singapore branch (Barclays Bank, Singapore)

27 February 2012 18 Barclays Capital | Apple, Inc.

IMPORTANT DISCLOSURES CONTINUED Apple, Inc. (AAPL) Stock Rating Sector View USD 525.76 (27-Feb-2012) 1-OVERWEIGHT 2-NEUTRAL Rating and Price Target Chart - USD (as of 27-Feb-2012) Currency=USD

Date Closing Price Rating Price Target 700 24-Jan-2012 420.41 630.00 23-Sep-2011 404.30 555.00 600 19-Jul-2011 376.85 515.00

500 20-Apr-2011 342.41 465.00 18-Jan-2011 340.65 450.00

400 12-Jan-2011 344.42 420.00 18-Oct-2010 318.00 390.00 300 12-Oct-2010 298.54 385.00 21-Jul-2010 254.24 340.00 200 22-Jun-2010 273.85 325.00 01-Jun-2010 260.83 320.00 100 21-Apr-2010 259.22 315.00

0 08-Apr-2010 239.95 300.00 Ju l - 0 9 Ja n - 1 0 Ju l - 1 0 Ja n - 1 1 Ju l - 1 1 Ja n - 1 2 27-Jan-2010 207.88 285.00

Closing Price Target Price 26-Jan-2010 205.94 265.00

07-Jan-2010 210.58 260.00 20-Oct-2009 198.76 235.00 13-Aug-2009 168.42 208.00 22-Jul-2009 156.74 188.00 09-Jun-2009 142.72 173.00 23-Apr-2009 125.40 155.00 06-Apr-2009 118.45 143.00 Link to Barclays Capital Live for interactive charting

Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by Apple, Inc. or one of its affiliates. Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from Apple, Inc. in the past 12 months. Barclays Bank PLC and/or an affiliate trades regularly in the securities of Apple, Inc.. Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from Apple, Inc. within the past 12 months. Apple, Inc. is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate. Apple, Inc. is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate. Valuation Methodology: Our price target is $630 based on 13x our FY13 EPS estimate of $48.46. Risks which May Impede the Achievement of the Price Target: Risks include: 1. the economic environment and consumer spending trends 2. Mac demand momentum 3. execution risk in Apple's ability to continue launching the iPhone successfully in the US and international markets.

27 February 2012 19

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