EQUITY RESEARCH Technology | U.S. IT Hardware | 24 May 2011

Stock Rating 1-OVERWEIGHT APPLE, INC. Unchanged iPhone Still Expected to Outgrow Market Sector View 1-POSITIVE Unchanged

Price Target USD 465.00 Welcome to this week’s Apple Monitor. We continue to believe Apple's valuation is Unchanged attractive as shares can benefit from iPad and iPhone demand, Mac share gains, international expansion and a pipeline of innovations. We reiterate 1-OW/1-Pos. Price (20-May-2011) USD 335.22 „ Barclays Capital Raises Handset & Smartphone Estimates: Ahead of Barclays Potential Upside/Downside +39% Capital’s 12th annual Global Communications, Media and Technology Conference Tickers AAPL

in NY, our Wireless team raised its handset estimates – including those for Market Cap (USD mn) 309996 smartphones. Within smartphones, the team now forecasts 420 million units in Shares Outstanding (mn) 924.75 2011 (was 410 million), representing 49% growth yoy – with the market growing Free Float (%) 99.29 to 851 million units by 2014. We continue to believe Apple is well positioned to 52 Wk Avg Daily Volume (mn) 18.4 grow faster than the smartphone market over the long term given its innovation in Dividend Yield (%) N/A software, the need to add more carriers, its leading number of Apps available and Return on Equity TTM (%) 38.78 its upcoming new services. For example, we see the new iCloud service (to be Current BVPS (USD) 66.49 introduced by 2H11) and a mobile payments network (likely a FY12 event) as Source: FactSet Fundamentals

potential catalysts for increasing the “utility” of the iPhone. We believe that Apple Price Performance Exchange-Nasdaq could see sales surge in the December quarter of this year with a new product and 52 Week range USD 364.90-231.35 with the most upside likely in FY12 with a major iPhone upgrade for 4G networks. 400 „ Not Expecting Significant Disruption Due to Hon Hai Explosion: Last 350 Friday (May 20), an explosion occurred at Hon Hai's manufacturing plant in 300 Chengdu, Sichuan province in China. According to our Barclays Capital colleagues, 250 while short-term disruptions are possible, the impact should be limited. Even in a 200 Ju l - 1 0 Oct- 10 Jan- 11 Apr- 11 worst-case scenario, Kirk Yang believes Hon Hai's original facilities in Shenzhen Link to Barclays Capital Live for interactive charting could quickly make up some of the shortfall from Chengdu by ramping up the idle

capacity, and he does not see risk to our current estimate of 6.6 million iPad units for C2Q11. U.S. IT Hardware Ben A. Reitzes 1.212.526.9517 AAPL: Quarterly and Annual EPS USD [email protected] 2010 2011 2012 Change y/y BCI, New York

FY Sep Actual Old New Cons Old New Cons 2011 2012 Jennifer Thorwart Q1 3.67A 6.43A 6.43A 6.43A 8.05E 8.05E 7.77E 75% 25% 1.617.342.4181 [email protected] Q2 3.33A 6.40A 6.40A 6.40A 6.19E 6.19E 6.59E 92% -3% BCI, New York Q3 3.51A 5.41E 5.41E 5.60E 6.13E 6.13E 6.57E 54% 13% Q4 4.64A 6.07E 6.07E 6.36E 7.63E 7.63E 7.48E 31% 26% Year 15.15A 24.30E 24.30E 24.63E 28.00E 28.00E 28.51E 60% 15%

P/E 13.8 12.0

Source: Barclays Capital Consensus numbers are from Thomson Reuters

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 14. Barclays Capital | Apple, Inc.

COMPANY SNAPSHOT

Apple Inc. IT Hardware

Income statement ($mn) 2010A 2011E 2012E 2013E CAGR Revenue 65,225 102,283 122,011 140,212 29.1% Stock Rating 1-OVERWEIGHT EBITDA 19,412 31,859 38,394 45,259 32.6% Sector View 1-POSITIVE EBIT 18,385 29,976 35,148 40,393 30.0% Price (20-May-2011) $335.22 Pre-tax income 18,540 30,288 35,580 41,043 30.3% Price Target $465 Net income 14,013 22,810 26,685 30,782 30.0% Ticker AAPL Reported EPS ($) $15.15 $24.30 $28.00$ 31.80 28.0% Diluted shares (m) 925 938 953 968 1.5% Investment case Dividend per share ($) - - - - NA We believe Apple's valuation is attractive & that shares can benefit from strong iPad & iPhone Margin and return data (%) Average demand, Mac share gains, international expansion & EBITDA margin 29.8 31.1 31.5 32.3 31.2 a pipeline of new innovations. We believe Apple deserves a higher multiple vs. the group & the EBIT margin 28.2 29.3 28.8 28.8 28.8 market given it is the best growth story in IT Pre-tax margin 28.4 29.6 29.2 29.3 29.1 hardware over the long term. Net margin 21.5 22.3 21.9 22.0 21.9 ROIC 30.5 36.5 37.8 38.7 35.9 ROA 22.8 23.3 20.6 20.8 21.9 Upside case $500 ROE 35.3 38.9 38.4 44.5 39.3 Apple has solid prospects for high organic growth, with open-ended potential to gain share in phones, Balance sheet and cash flow ($mn) CAGR tablets & Macs. We view Apple’s upside scenario at Tangible fixed assets 30,159 55,910 78,378 108,629 53.3% $500 based on 18x our FY12 EPS estimate of $28 (18x = 2-yr forward PE average; 15x = 1-yr forward Intangible fixed assets 1,083 1,083 1,083 1,083 0.0% PE average). Cash and equivalents 11,261 27,019 49,231 78,545 91.1% Total assets 75,183 120,581 138,893 157,778 28.0% Short and long-term debt - - - - NA Downside case $325 Other long-term liabilities 13,340 20,919 24,954 28,677 29.1% We believe the biggest issues facing the stock Total liabilities 27,392 42,955 51,240 58,884 29.1% include the overall economy, potential for Net debt/(funds) (25,620) (40,275) (62,487) (91,801) NA component shortages & very high expectations. We Shareholders' equity 47,791 69,480 69,610 68,633 12.8% view Apple’s downside scenario at $325 based on Change in working capital 1,212 1,362 2,817 2,400 25.6% 12x our FY12 EPS estimate of $28 (12x is Apple’s 5- yr trough multiple). Operating cash flow 18,595 30,178 37,008 42,608 31.8% Capital expenditure (2,005) (4,638) (7,500) (9,000) NA Free cash flow 16,590 25,540 29,508 33,608 26.5% Upside/downside scenarios

$500 Valuation and leverage metrics Average 619 $465 (46.8%)(49.1%) P/E (x) 22.1 13.8 12.0 10.5 14.6 519 (36.5%)(38.7%) $325 14.7 9.0 7.0 5.4 9.0 419 EV/EBITDA (x) (-4.55%)(-3.04%) FCF yield (%) 5.4 8.1 9.2 10.4 8.3 319 Price Upside Target Case Price/sales (x) 4.8 3.1 2.6 2.3 3.2 Downside 219 Case 6.5 4.5 4.6 4.7 5.1 Price/BV (x) 119 Dividend yield (%) 0.00.00.00.00.028-May-10 20-May-11 Total debt/capital (%) 0.00.00.00.00.0 Source: FactSet Selected operating metrics (units in 000) CAGR Geographic Revenue Distribution FY10 Desktops 4,627 4,437 4,125 3,950 -5.1% APAC Notebooks 9,035 12,523 15,703 18,693 27.4% 10 Line13% item 1 Line item 2 8 Total Macs 13,662 16,960 19,828 22,643 18.3% Americas Retail iPods 50,312 43,972 37,743 31,975 -14.0% 6 37% 15% iPhones 39,989 70,587 92,589 115,189 42.3% 4 2 iPads 7,458 26,680 39,827 51,168 90.0% Japan 0 6% 2010A 2011E 2012EEMEA 2013E 29% Source: Company data, Barclays Capital Note: FY end Sept.

24 May 2011 2 Barclays Capital | Apple, Inc.

The Barclays Capital Apple Monitor – 5/24/11

A quick guide to the Barclays Capital Apple Monitor: The first section tells the stories or research over the last week that we think are most important for the stock price. The second 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. 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. Week-to-week changes in top seller lists can tell you about popularity, consumer buying patterns and competition.

1. Barclays Capital Raises Handset & Smartphone Estimates; Not Expecting Significant Disruption from Hon Hai Explosion:

We believe Apple can continue Barclays Capital Raises Handset & Smartphone Estimates – Apple Should Grow to grow iPhone sales above the Faster than Market Long Term: Ahead of Barclays Capital’s 12th annual Global market rates and see even more Communications, Media and Technology Conference in NY, our Wireless team raised its upside next year with a major handset estimates – including those for smartphones. According to our colleague, Jeff Kvaal, upgrade. continued emerging market penetration and growing smartphone usage globally are the dominant drivers of market growth. Given a better-than-expected 1Q coupled with the view of the sustainability of the above market drivers over the next one to two years, the wireless team raised its global handset and smartphone estimates for 2011-2014. The new forecast includes global handset unit volumes of approximately 1.6 billion in 2011 (was 1.5 billion), representing a growth of 10% year over year – with the market growing to over 1.9 billion by 2014. The forecast for 10% unit growth for 2011 is reflective of healthy ongoing handset demand and a less dramatic impact from the disaster in Japan than initially feared.

Figure 1: Global Smartphone Shipments 2003-2014E (in millions)

(in millions) 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E Feature & Basic Phones 512 660 758 909 1031 1086 1065 1137 1147 1137 1108 1060 Smartphones 8 20 54 82 122 140 189 282 420 568 710 851 Total Handsets 520 680 812 991 1,153 1,226 1,254 1,419 1,568 1,704 1,818 1,912 31% 19% 22% 16% 6% 2% 13% 10% 9% 7% 5% YoY Growth Feature & Basic Phones 29% 15% 20% 13% 5% -2% 7% 1% -1% -3% -4% Smartphones 150% 170% 52% 49% 15% 35% 49% 49% 35% 25% 20%

Smartphones Penetration 2% 3% 7% 8% 11% 11% 15% 20% 27% 33% 39% 45% Source: Gartner and Barclays Capital Estimates

Within smartphones, the team now forecasts 420 million units in 2011 (was 410 million), representing growth of 49% year over year – with the market growing to 851 million units by 2014. We continue to believe Apple is well positioned to grow faster than the smartphone market over the long-term given its innovation in software, the need to add more carriers, its leading number of Apps available and its upcoming new services. For example, we see the new iCloud service (to be introduced by 2H11) and a mobile payments network (likely a FY12 event) as potential catalysts for increasing the “utility” of the iPhone. We estimate Apple will sell 16.6 million iPhones in C2Q (up 98% y/y), 70.5 million for FY11 ending September (up 77% y/y), 92.5 million for FY12 (up 31% y/y) and 115.2 million for FY13 (up 24% y/y). On a calendar year basis, we estimate Apple will ship 79.75 million iPhones in CY11 (up 68% y/y) and 99.9 million in CY12 (up 25% y/y). We believe that Apple could see sales surge in the December quarter of this year with a new product and with the most upside likely in FY12 with a major iPhone upgrade for 4G networks.

24 May 2011 3 Barclays Capital | Apple, Inc.

Figure 2: Apple iPhone Model

Estimates 2009 Dec-09 Mar-10 Jun-10 Sep-10 2010 Dec-10 Mar-11 Jun-11 Sep-11 2011E 2012E 2013E iPhone Units Sold (thousands) 20,731 8,737 8,752 8,398 14,102 39,989 16,235 18,647 16,607 19,098 70,587 92,589 115,189 ASP ($) 591 620 605 595 610 608 625 625 605 577 607 563 532 iPhone Hardware Revenue ($ mm) $ 12,254 $ 5,420 $ 5,295 $ 5,000 $ 8,602 $ 24,317 $ 10,147 11,654$ 10,047 $ 11,019 $ 42,868 $ 52,162 $ 61,293 Hardware Revenue net of def. revenue adj. 5,310 5,120 4,950 8,518 23,897$ 10,066 11,542 9,947 10,905 $ 42,461 $ 51,632 $ 60,635 Accessories and other 968 268 325 384 304 $ 1,281 402 495 445 490 $ 1,832 $ 2,364 2,723$ Reported Phone Related total ($ mm) 13,033 5,578 5,445 5,334 8,822 25,179 10,468 12,298 10,393 11,395 44,293 53,995 63,358

Revenue trends iPhone Units Sold y/y 78% 100% 131% 61% 91% 93% 86% 113% 98% 35% 77% 31% 24% q/q 19% 0% -4% 68% 15% 15% -11% 15% iPhone Hardware Revenue y/y 104% 107% 137% 72% 91% 98% 87% 120% 101% 28% 76% 22% 18% q/q 20% -2% -6% 72% 18% 15% -14% 10%

Phone Related Revenue Total y/y 93% 90% 124% 74% 92% 93% 88% 126% 95% 29% 76% 22% 17% q/q 21% -2% -2% 65% 19% 17% -15% 10% Source: Company Reports and Barclays Capital Estimates

At this time we remain Not Expecting Significant Disruption Due to Hon Hai Explosion: Last Friday (May comfortable with our iPad unit 20), an explosion occurred at Hon Hai's manufacturing plant in Chengdu, Sichuan province shipment estimate of 6.6 million in China. According to Kirk Yang, Barclays Capital’s Asia Ex-Japan IT Hardware analyst, this for C2Q and will continue to is the new location recently set up to produce Apple's iPad 2 and related components and monitor the Hon Hai situation was added to the existing facilities in Shenzhen where both iPad 1 and iPad 2 have been closely. made since 1Q10.

According to our colleagues out of Asia, while short-term disruptions are possible, the impact should be limited. Even in a worst-case scenario in which there are significant iPad 2 production disruptions in Chengdu, in terms of either metal casing component shortages or assembly line shutdown (which we do not believe is likely), Kirk Yang expects that Hon Hai's original facilities in Shenzhen could quickly make up some of the shortfall from Chengdu by ramping up the idle capacity, and does not see risk to our current estimate of 6.6 million units of iPad 2 in C2Q. The worst-case scenario could negatively impact iPad 2 shipments in 3Q11 if the Chengdu plants were to shut down for more than 2-3 months, which again we do not believe is likely.

2. 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. 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 assures that iPhones retain relatively high usage characteristics, leading to the purchase of data plans that drive high subsidies from carriers (= high margins for Apple over time). On 1/22/11, Apple announced that it has hit 10 billion downloads – Apple has more than 350K apps available for download including over 65K native for the iPad. The iTunes store features a catalog of more than 14 million songs, more than 50,000 TV episodes and more than 10,000 films including over 3,500 in HD video. On 1/6/11 the Mac App Store officially launched and the company announced it had more than 1 million downloads in the first day. On 3/2/11, Apple announced that it had paid developers over $2 billion dollars since the App Store inception.

24 May 2011 4 Barclays Capital | Apple, Inc.

Figure 3: Top iPhone Apps

Top 10 Paid Apps 5/9 5/16 5/23 1 Doodle God™ $0.99 Death Rally $0.99 Pocket God $0.99 2 Stickman Cliff Diving $0.99 Foodies $0.99 Zenonia® 3 $0.99 3 Stick Stunt Biker $0.99 Army of Darkness Defense $0.99 Infinity Blade $2.99 4 Full Fitness $0.99 Fast and Furious The Game $0.99 Fast and Furious The Game $0.99 5 ZombieSmash $0.99 Doodle God™ $0.99 Doodle God™ $0.99 6 THE GAME OF LIFE Classic Edition $0.99 THE GAME OF LIFE Classic Edition $0.99 THE GAME OF LIFE Classic Edition $0.99 7 MONOPOLY $0.99 MONOPOLY $0.99 MONOPOLY $0.99 8 iStunt 2 $0.99 Where's Waldo?™ The Fantastic… $0.99 Where's Waldo?™ The Fantastic… $0.99 9Where's Waldo?™ The Fantastic… $0.99 Air Penguin $0.99 Angry Birds Rio $0.99 10 Air Penguin $0.99 Angry Birds Rio $0.99 Tiny Wings $0.99 Source: Apple.com

Top 10 Free Apps 5/9 5/16 5/23 1 Top 100 Music - FREE Spray Can 3 Smack That Gugl 2 Tiny Nightclub Marshmallow Cookie Maker EPIC FAIL 3 Legendary Wars UFC® Undisputed™ Lite Super Stickman Golf Free 4 FreeAppKing Look Again! HeyWire Free Texting 5 Flower Garden Pocket Home Family Guy Free 6 Fast & Furious The Game Test Drive Big Pollution Free Flying Hamster 7 Crime Inc. MetalStorm: Online™ Hanged Till Death 8 Magic P iano R at On A Skateboard H igh Noon 9 Monsterz Revenge Party in My Dorm Weather Lock Screen Free 10 Doodle Fill Iron Commando pro Picture Effect Magic Source: Apple.com

Top Grossing Apps 5/9 5/16 5/23 1 Magic Piano FREE MetalStorm: Online™ FREE High Noon FREE 2 Doodle God™ $0.99 Army of Darkness Defense $0.99 We Rule Deluxe FREE 3 Office Jerk FREE Hipstamatic $1.99 MetalStorm: Online™ FREE 4 NBA JAM by EA SPORTS™ $4.99 Magic Piano FREE Restaurant Story™ FREE 5 Tap Pet Hotel FREE Tap Pet Hotel FREE Magic Piano FREE 6 Tiny Zoo FREE Tiny Zoo FREE Tap Pet Hotel FREE 7 Trade Nations™ FREE Original Gangstaz FREE Tiny Zoo FREE 8 Camera+ $1.99 Camera+ $1.99 Original Gangstaz FREE 9 World War™ FREE Tap Zoo FREE Camera+ $1.99 10 Tap Zoo FREE MLB.com At Bat 11 $14.99 Tap Zoo FREE Source: Apple.com

24 May 2011 5 Barclays Capital | Apple, Inc.

Figure 4: Top iPad Apps

Top Paid iPad Apps 5/9 5/16 5/23 1 Drawn: The Painted Tower $4.99 Death Rally $0.99 Need for Speed™ Hot Pursuit $4.99 2 Big City Adventure: New York City $0.99 MyPad+ $0.99 Casey's Contraptions $2.99 3 A Witch's Curse: Princess Isabella $0.99 Army Of Darkness Defense HD $2.99 Ticket to Ride $6.99 4 Amazon: Hidden Expedition $0.99 StarFront: Collision HD $6.99 SketchBook Pro $4.99 5 Haunted Manor: Lord of Mirrors $4.99 TuneIn Radio Pro $0.99 Bumpy Road $2.99 6 Splashtop Remote Desktop $0.99 Eternal Legacy HD $4.99 Infinity Blade $2.99 7 Azada HD $0.99 Let's Gold! 2 HD $4.99 MONOPOLY $4.99 8 Empress of the Deep: The Darkest… $4.99 Splinter Cell Conviction™ HD $4.99 MyPad+ for Facebook $0.99 9 Awakening: The Dreamless Castle $0.99 Splashtop Remote Desktop for iPad $1.99 Splashtop Remote Desktop for iPad $1.99 10 Buckingham Palace: Hidden Myst… $0.99 Weather+ $0.99 Where's Waldo?™ - The Fantasic… $0.99 Source: Apple.com

Top Free iPad Apps 5/9 5/16 5/23 1 Hit Tennis 2 Rat On A Skateboard Pocket Dinosaurs 2 HD: Insanely Add… 2 Crazy Basketball HD eBay for iPad Molecules 3 WeeMee Life HD SnagFilms iQuarterback 2 4 Frisbee® Forever Texas Poker Candy Train 5 Secret Mission - The Forgotten Island HD MetalStorm: Online™ Glam Joe HD 6 Heartwild Solitaire for iPad PBS KIDS Video for iPad Chop Chop Ninja HD 7 Textfree for iPad Tap The Frog HD My Clinic 8 Bank of America for iPad Gilt for iPad Flux Family Secrets - The Ripple… 9 Falling Fred Spirits for iPad Rat On A Skateboard 10 Minesweeper Q for iPad The New Yorker Magazine MetalStorm: Online™ Source: Apple.com

Top Grossing iPad Apps 5/9 5/16 5/23 1 iMuscle $4.99 MetalStorm: Online™ FREE Flux Family Secrets - The Ripple… FREE 2 Fortune Magazine FREE Tap Zoo FREE SketchPad Pro $4.99 3 Drawn: The Painted Tower $4.99 Death Rally $0.99 Casey's Contraptions FREE 4 Words With Friends HD $0.99 OmniOutliner for iPad $19.99 We Rule Deluxe FREE 5 Pulse: Volume One $4.99 StarFront: Collision HD $6.99 Ticket to Ride $6.99 6 60 Minutes for iPad $4.99 Army of Darkness Defense HD $2.99 MetalStorm: Online™ FREE 7 Real Racing 2 HD $9.99 The New York Magazine $9.99 TapZoo FREE 8 Trade Nations™ FREE ForeFlight Mobile HD Aviation… FREE The New Yorker Magazine FREE 9 Plants Vs. Zombies HD $6.99 Trade Nations™ FREE ForeFlight Mobile HD Aviation… FREE 10 SCRABBLE for iPad $9.99 Plants vs. Zombies HD $6.99 NBA JAM by EA SPORTS™ $4.99 Source: Apple.com

24 May 2011 6 Barclays Capital | Apple, Inc.

Figure 5: Top Mac Apps

Top Paid Mac Apps 5/9 5/16 5/23 1 Hallmark Card Studio Essentials $19.99 Mystery P.I. - Stolen in San Franc… $6.99 BoinxTV Home $9.99 2 Yummy Soup! $14.99 Space Gremlin $3.99 Hype $29.99 3 PaintMee $5.99 FlatOut 2 $9.99 Sid Meier's Pirates! $29.99 4 Samorost 2 $2.99 Where's Waldo?™ The Fantastic… $2.99 Modern Combat: Domination $12.99 5 Lock Screen $0.99 Let's Golf! 2 $4.99 Weather HD $3.99 6 Jet Set Go $6.99 PaintMee $5.99 Hardcore Dirt Bike $3.99 7 VirusBarrier Plus $7.99 VirusBarrier Plus $9.99 Mahjong Elements HD X $4.99 8 Star Wars®: Knights of the Old...® $19.99 Asphalt 6: Adrenaline $6.99 Parallels Transporter $0.99 9 FaceTime $0.99 Star Wars®: Knights of the Old...® $19.99 Fantastical $14.99 10 iSplash $0.99 FatBooth $0.99 Memory Cleaner $5.99

Top Free Mac Apps 5/9 5/16 5/23 1 Victory March Linemaze Alpine Crawler 2 Clean Slate Victory March Linemaze 3 Cloud Minesweeper 101 Victory March 4 Stripe Physics Cloud Cloud 5 Shadow Era Stripe Physics Photo Effects (Lite) 6 Texas Poker Photo Effects (Lite) Texas Poker 7 Touch Fly Free Texas Poker Mahjong! Free 8 Air Hockey Free Mahjong! Free Shotgun FunFun 9 Mahjong! Free Shotgun FunFun Typist 10 Shotgun FunFun Typist The Unarchiver

Top Grossing Mac Apps 5/9 5/16 5/23 1 Movie Draft SE $29.99 SketchBook Pro $29.99 LEGO Indiana Jones 2 $29.99 2 Hallmark Card Studio Essentials $19.99 Where's Waldo?™ The Fantastic… $2.99 Hype $29.99 3 Call of Duty® $19.99 Darkest of Days $24.99 Weather HD $3.99 4 VirusBarrier Plus $7.99 Movie Draft SE $29.99 Modern Combat: Domination $12.99 5 Home Design Studio 15 $149.99 Call of Duty ® $19.99 Sid Meier's Pirates! $29.99 6 Star Wars®: Empire At War $29.99 VirusBarrier Plus $9.99 Fantastical $14.99 7 Aperture $79.99 Home Design Studio 15 $149.99 FX Photo Studio Pro $39.99 8 Pages $19.99 Aperture $79.99 VirusBarrier Plus $9.99 9 iPhoto $14.99 Pages $19.99 Aperture $79.99 10 Keynote $19.99 iPhoto $14.99 Pages $19.99 Source: Apple.com

3. Weekly PC & Mac Trends – Macs Continue to Outgrow the Market: Total PC unit volumes were indicated -2% y/y for the week of May 8 – May 14 with Mac unit volumes indicated up 33% y/y. Mac shipments were up 35% last week with a +18% y/y average over the previous four weeks. We believe the re-acceleration in Mac unit growth over the past two weeks was driven by the launch of new iMacs on 5/3. NPD’s weekly data is a small subset of its monthly data; weekly data does include Apple store sales but not sales from Apple.com.

With regard to the whole PC market for the week of 5/8/11-5/14/11, NPD indicates that total unit sales in the US were -2% y/y in units (+1% y/y in dollar sales) following a flat y/y performance last week and an average decline of 4% over the previous four weeks (which includes Easter week which was negatively impacted by one less shopping day). Notebook units were indicated down 3% (vs. -1% y/y last week and -4% y/y average performance over the previous four weeks) while desktop units are indicated up 4% y/y (vs. +6% last week, an average decline of 5% y/y over the previous four weeks).

24 May 2011 7 Barclays Capital | Apple, Inc.

4. iPad 2 Lead Times Still 1-2 Weeks: Most major Apple products are shipping within 24 hours on Apple.com with the exception of the 12 core Mac Pro and the Mac Pro Server which are still shipping within 2-4 business days, iPad 2 SKUs which continue to show shipment delays of 1-2 weeks and the new white iPhone SKUs are still shipping within 1-2 business days. Regarding iPad 2, while BestBuy.com still isn’t showing in store availability, iPad 2 products do show availability at some Wal-Mart retail stores. 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 stores selling each SKU on a weekly basis, meaning the sample is good for trends but not for absolute availability percentages.

24 May 2011 8 Barclays Capital | Apple, Inc.

Figure 6: Product Ship Times in Business Days from Apple.com

Mar 14 Mar 21 Apr 4 Apr 12 Apr 18 Apr 25 May 2 May 9 May 16 May 23

Shuffle 2GB Updated (Sept 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs Nano 8GB Updated (Sept 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs Nano 16GB Updated (Sept 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs Classic 160GB (Sept 09) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs Touch 8GB Updated (Sept 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs Touch 32GB Updated (Sept 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs Touch 64GB Updated (Sept 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs iPad 2 Black Wi-Fi (Mar 11) 4-5wks 4-5wks 3-4wks 2-3wks 2-3wks 1-2wks 1-2wks 1-2wks 1-2wks 1-2wks iPad 2 White Wi-Fi (Mar 11) 4-5wks 4-5wks 3-4wks 2-3wks 2-3wks 1-2wks 1-2wks 1-2wks 1-2wks 1-2wks iPad 2 Black 3G Verizon (Mar 11) 4-5wks 4-5wks 3-4wks 2-3wks 2-3wks 1-2wks 1-2wks 1-2wks 1-2wks 1-2wks iPad 2 White 3G Verizon (Mar 11) 4-5wks 4-5wks 3-4wks 2-3wks 2-3wks 1-2wks 1-2wks 1-2wks 1-2wks 1-2wks iPad 2 Black 3G AT&T (Mar 11) 4-5wks 4-5wks 3-4wks 2-3wks 2-3wks 1-2wks 1-2wks 1-2wks 1-2wks 1-2wks iPad 2 White 3G AT&T (Mar 11) 4-5wks 4-5wks 3-4wks 2-3wks 2-3wks 1-2wks 1-2wks 1-2wks 1-2wks 1-2wks iPhone 3GS 8GB (June 2010) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs iPhone 4 16GB - BlackAT&T (June 2010) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs iPhone 4 16GB - White AT&T (May 2011) ------3-5 bd 1-2 bd 1-2 bd 1-2 bd iPhone 4 32GB - BlackAT&T (June 2010) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs iPhone 4 32GB - White AT&T (May 2011) ------3-5 bd 1-2 bd 1-2 bd 1-2 bd iPhone 4 16GB - BlackVerizon (Feb 2011) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs iPhone 4 16GB - White Verizon (May 2011) ------3-5 bd 1-2 bd 1-2 bd 1-2 bd iPhone 4 32GB - BlackVerizon (Feb 2011) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs iPhone 4 32GB - White Verizon (May 2011) ------3-5 bd 1-2 bd 1-2 bd 1-2 bd

MacBook Wh2.4Ghz Updated (May 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs

MacBook Air11" 64GB(Oct 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs MacBook Air11" 128GB(Oct 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs MacBook Air13" 128GB(Oct 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs MacBook Air13" 256GB(Oct 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs

MacBook Pro2.3Ghz 13" (Feb 2011) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs MacBook Pro2.7Ghz 13" (Feb 2011) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs MacBook Pro2.0Ghz 15" (Feb 2011) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs MacBook Pro2.2Ghz 15" (Feb 2011) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs MacBook Pro2.2Ghz 17" (Feb 2011) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs

Mac Mini 320GB (June 2010) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs Mac Mini 500GB (June 2010) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs iMac 21.5" 2.5 $1199 (May 11) 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs iMac 21.5" 2.7 $1499 (May 11) 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs iMac 27" 2.7 $1699 (May 11) 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs iMac 27" 3.1 $1999 (May 11) 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs 24 hrs

Mac Pro Quad Core2499 (Aug 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs Mac Pro 8 Core 3499 (Aug 10) 24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs24 hrs Mac Pro 12 Core 4999 (Aug 10) 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd Mac Pro Server $2,999 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd 2-4bd Source: Apple.com

24 May 2011 9 Barclays Capital | Apple, Inc.

Figure 7: iPod/iPad Availability at Best Buy Retail Stores (iPad 2 Listed but Still Not Showing Any In Store Availability):

Best Buy: 14-Mar 21-Mar 4-Apr 12-Apr 18-Apr 25-Apr 2-May 9-May 16-May 23-May 8GB Touch (4G) 92% 94% 100% 94% 94% 100% 94% 97% 100% 97% 32GB Touch (4G) 100% 100% 100% 100% 94% 100% 97% 94% 97% 100% 64GB Touch (4G) 89% 89% 89% 100% 81% 78% 92% 92% 97% 94% 8GB Nano Graphi te (6G) 89% 72% 75% 94% 97% 97% 92% 92% 89% 81% 16GB Nano Gra phite (6G) 75% 50% 72% 89% 89% 83% 89% 78% 89% 94% 160GB Classic Black 0% 14% 25% 64% 78% 69% 86% 78% 81% 97% 16GB iPad Wi-Fi 31% 0% 0% 0% 0% 0% 0% 0% 0% 0% 32GB iPad Wi-Fi 42% 8% 0% 0% 0% 0% 0% 0% 0% 0% 64GB iPad Wi-Fi 53%39%3%3%3%0%0%0%0%0% 16GB iPad Wi-Fi + 3G 28% 8% 0% 0% 0% 69% 69% 42% 36% 33% 32GB iPad W i-Fi + 3G 50% 31% 11% 0% 0% 44% 56% 44% 28% 22% 64GB iPad W i-Fi + 3G 86% 75% 56% 44% 28% 28% 25% 17% 11% 8% Source: BestBuy.com

Figure 8: iPod/iPad Availability at Wal-Mart Retail Stores:

Wal-Mart: 14-Mar 21-Mar 4-Apr 12-Apr 18-Apr 25-Apr 2-May 9-May 16-May 23-May 8GB Touch (4G) 98% 98% 98% 99% 98% 87% 86% 97% 100% 87% 32GB Touch (4G) 91% 79% 84% 96% 93% 90% 75% 73% 84% 79% 64GB Touch (4G) 87% 88% 84% 90% 88% 92% 87% 81% 78% 86% 8GB Nano Charcoal (6G) 71% 70% 70% 95% 98% 99% 99% 89% 71% 74% 16GB iPad 2 (Wi-Fi; Black) - - 10% 11% 10% 21% 16% 10% 15% 15% 32GB iPad 2 (Wi-Fi; Black) - - 12% 13% 11% 14% 19% 4% 3% 4% 64GB iPad 2 (Wi-Fi; Black) - - 10% 15% 13% 17% 13% 15% 15% 12% 16GB iPad 2 (Wi-Fi; White) - - 8% 15% 7% 25% 20% 0% 0% 3% 32GB iPad 2 (Wi-Fi; White) - - 34% 12% 12% 5% 18% 18% 19% 28% 64GB iPad 2 (Wi-Fi; White) - - 8% 13% 8% 13% 13% 13% 13% NA Source: Walmart.com

5. Amazon Top Sellers; Netbook ASP Remains Below $300

Below we list the weekly trend of the top electronics sold through Amazon.com. As of May 23, 2011, Apple held 9 of the top 10 MP3 player slots, 6 of the top 10 desktops and 5 of the top 10 notebooks. In terms of PCs, the netbook ASP dropped to $278 this week vs. $290 last week; for comparison the tablet ASP is $506 this week vs. $572 the previous week and the top 10 notebook ASP is $983 this week vs. $872 the previous week. Please see our chart in Figure 15 which shows YTD trends in both netbook and tablet ASPs. Note that iPads are not sold directly from Amazon, but listed/fulfilled by partners instead. We believe Amazon will launch its own branded tablet device by year-end.

24 May 2011 10 Barclays Capital | Apple, Inc.

Figure 9: Top Electronics on Amazon.com

Top Electronics on Amaz on: May 2 May 9 May 16 May 23 1 Kindle $114 Kindle $114 Kindle $114 Kindle $114 2 Kindle $189 Kindle $189 Kindle $139 Kindle $139 3 Kindle $139 Kindle $139 Kindle $189 Kindle $189 4 Kindle White $189 Kindle White $189 iPod Touch 8GB (4G) $205 iPod Touch 8GB (4G ) $205 5iPod Touch 8GB (4G) $205 iPod Touch 8GB (4G ) $205 iPod Touch 32GB (4G) $275 iPod Touch 32GB (4G ) $275 6 iPod Touch 32GB (4G) $275 iPod Touch 32GB (4G ) $275 Kindle White $189 Kindle White $189 7 Western Digital 1TB $110 Garmin Forerunner 305 $129 Western Digital 1TB $105 Garmin nuvi 1350LMT GPS $148 8 Kindle DX $379 Western Digital 1TB $110 Garmin Forerunner 305 $129 Panasonic DMC-FH20K Camera #143 9 Garmin Forerunner 305 $129 Kindle DX $379 Apple TV MC572LL/A (2010) $98 Western Digital 1TB $99 10 Motorola SB6120 Cable Modem $88 Apple TV MC572LL/A (2010) $98 Canon PowerShot A3000IS $89 Garmin Forerunner 305 $129 11 Apple TV MC572LL/A (2010) $98 Roku XD Streaming Player $78 Logitech C910 Webcam $78 Canon PowerShot A3000IS $89 12 Cisco-Linksys E4200 Router $160 Flip UltraHD 8 GB camera $129 Roku XD Streaming Player $78 Apple TV MC572LL/A (2010) $95 13 Garmin nuvi 1450LMT GPS $189 Nikon D3100 Camera $599 iPod classic 160 GB black (4G) $230 iPod classic 160 GB black (4G) $229 14 Seagate Expansion 500 GB $60 iPod classic 160 GB black (4G) $229 Seagate Expansion 500 GB $60 Roku XD Streaming Player $80 15 iPod classic 160 GB Black 229 Seagate Expansion 500 GB $60 Panasonic DMP-BDT210 $161 Kindle DX $379 16 SanDisk Sansa Clip +4GB $36, 28% off Logitech Wireless Desktop MK320 $28 Garmin nuvi 1450LMT GPS $180 Motorola SB6120 Cable Modem $99 17 iPod 2GB shuffle silver (4G) $46 Garmin nuvi 1450LMT GPS $150 Nikon D3100 Camera $599 Garmin nuvi 1450LMT GPS $180 18 Garmin nuvi 1350LMT GPS $150 iPod 2GB shuffle silver (4G) $46 Kindle DX $379 Seagate Expansion 500 GB $60 19 Midland WR300 Radio $55 Medialink Wireless N Router $50 Garmin nuvi 1350LMT GPS $150 iPod Touch 64GB (4G ) $350 20 Roku XD Streaming Player $80 Cisco-Linksys E4200 Router $160 Motorola SB6120 Cable Modem $99 Garmin nuvi 1490LMT GPS $197 21 Midland WR-120B Radio $37 Motorola SB6120 Cable Modem $99 Logitech Wireless Desktop MK320 $28 Logitech Wireless Desktop MK320 $25 22 DROID Incredible Screen Protectors. $0.72 iPod 8GB nano graphite (6G) $135 Medialink Wireless N Router $50 Panasonic DMP-BDT210 $160 23 Etón Red Cross ARCFR160R $27 Plugable USB 2.0 Hub $27 iPod 2GB shuffle silver (4G) $46 Flip UltraHD 8 GB camera $133 24 Nikon Coolpix L22 $79 Logitech C310 Webcam $38 DROID Incredible Screen Protectors. $0.72 iPod 2GB shuffle silver (4G) $46 25 Logitech Wireless Desktop MK320 $24 Logitech C910 Webcam $78 Logitech Wireless Mouse M305 $20 Medialink Wireless N Router $50 Source: Amazon.com

Figure 10: Top MP3 Players on Amazon.com

Top 10 MP3 Players on Amazon: May 2 May 9 May 16 May 23 1 iPod Touch 8GB $205 (4G) iPod Touch 8GB $205 (4G) iPod Touch 8GB $205 (4G) iPod Touch 8GB $205 (4G) 2 iPod Touch 32GB $275 (4G) iPod Touch 32GB $275 (4G) iPod Touch 32GB $275 (4G) iPod Touch 32GB $275 (4G) 3 iPod classic 160 GB black (4G) $229 iPod classic 160 GB black (4G) $229 iPod classic 160 GB black (4G) $229 iPod classic 160 GB black (4G) $229 4 SanDisk Sansa Clip +4GB $36, 28% off iPod 2GB shuffle Silver (4G) $46 iPod 2GB shuffle Silver (4G) $46 iPod Touch 64GB $350 (4G) 5 iPod 2GB shuffle Silver (4G) $46 iPod 8GB nano graphite (6G) $130 iPod Touch 64GB $365 (4G) iPod 2GB shuffle Silver (4G) $46 6 iPod touch 64GB $365 (4G) SanDisk Sansa Clip +4GB $42, 15% off SanDisk Sansa Clip +2GB $30, 26% off iPod 8GB nano graphite (6G) $135 7 iPod 8GB nano graphite (6G) $135 iPod touch 64GB $365 (4G) iPod 16GB nano graphite (6G) $165 iPod classic 160 GB silver (4G) $229 8 iPod 2GB shuffle Blue (4G) $46 SanDisk Sansa Clip+ 2 GB $30, 26% off iPod 8GB nano pink (6G) $130 SanDisk Sansa Clip +8GB $56, 20% off 9 SanDisk Sansa Clip +8GB $52, 26% off iPod 16GB nano graphite (6G) $165 iPod classic 160 GB silver (4G) $229 iPod 16GB nano graphite (6G) $165 10 SanDisk Sansa Clip+ 2 GB $30, 26% off iPod 8GB nano blue (6G) $130 SanDisk Sansa Clip +8GB $56, 20% off iPod 2GB shuffle Blue (4G) $46 Source: Amazon.com

Figure 11: Top Notebooks on Amazon.com

Top 10 Notebooks on Amazon: May 2 May 9 May 16 May 23 1 MacBook Pro MC700LL/A $1140 Toshiba Satellite L655-S5158 $480 Toshiba Satellite L655-S5158 $480 Toshiba Satellite L655-S5158 $480 2 Toshiba Portege R835-P56x $852 MacBook Pro MC700LL/A $1140 MacBook Pro MC700LL/A $1139 MacBook Pro MC700LL/A $1139 3 Dell Inspiron 14R 1181MRB $530 Dell Inspiron M5030 2800B3D $400 Acer AS1430Z-4677 $379 MacBook Pro MC774LL/A $1126 4 Acer AS1430Z-4677 $378 Toshiba Portege R835-P56x $852 Acer AS5253-BZ602 $350 Acer AS5253-BZ602 $350 5 MacBook Pro MC721LL/A $1710 MacBook Pro MC721LL/A $1710 MacBook Pro MC721LL/A $1710 Acer AS1430Z-4677 $410 6 Toshiba Satellite L655-S5158 $550 Acer AS1430Z-4677 $379 Toshiba Portege R835-P56x $800 Toshiba Portege R835-P56x $840 7 Toshiba Satellite L655-S5156 $469 MacBook Pro MC724LL/A $1425 MacBook MC516LL/A $950 MacBook MC516LL/A $950 8 MacBook Pro MC723LL/A $2060 Acer AS5253-BZ602 $350 MacBook Air MC505LL/A $938 MacBook Pro MC721LL/A $1710 9 Dell Inspiron M5030 2800 B3D $450 MacBook Pro MC723LL/A $2060 ASUS G73SW-XA1 $1399 ASUS G73SW-XA1 $1399 10 MacBook Pro MC724LL/A $1425 MacBook MC516LL/A $950 HP dv6-3230us $575 MacBook Pro MC724LL/A $1425 Source: Amazon.com

24 May 2011 11 Barclays Capital | Apple, Inc.

Figure 12: Top Desktops on Amazon.com

Top 10 Desktops on Amazon: May 2 May 9 May 16 May 23 1 Mac Mini MC270LL/A $665 HP s5710f $350 iMac MC309LL/A $1000 iMac MC309LL/A $1140 2 iMac MC508LL/A $1130 Mac Mini MC270LL/A $664 Mac Mini MC270LL/A $664 Mac Mini MC270LL/A $664 3 Acer AR3700-U3002 $347 Compaq CQ5700F $280 Acer AR3700-U3002 $345 iMac MC813LL/A $1615 4 HP p6720f $550 iMac MC309LL/A $1189 iMac MC813LL/A $1694 Acer AR3700-U3002 $345 5 HP 310-1125f $600 Acer AX3910-U4022 $440 iMac MC508LL/A $1180 Acer AX3910-U4022 $440 6 Sony VAIO VPC-J11BFX/B $650 iMac MC508LL/A $1180 iMac MC511LL.A $1670 iMac MC812LL/A $1425 7 Acer AX3910-U4022 $440 HP p6720f $580 HP p6720f $479 iMac MC814LL/A $1900 8 Dell GX620 Computer $115 (used) Acer AR3700-U3002 $345 Acer AX3910-U4022 $423 HP p6720f $510 9 Zotac MAG Atom N330 $268 iMac MC813LL/A $1684 Dell Inspiron iO23055-2545-MSL $550 eMachines EL1352-43 $300 10 Dell GX270 SFF $70 (used) iMac MC814LL/A $1994 Lenovo H405 77231AU $346 iMac MC508LL/A $1040 Source: Amazon.com

Figure 13: Top Tablets on Amazon.com

Top 10 Tablets on Amazon: May 2 May 9 May 16 May 23 1 Motorola XOOM Tablet $590 Motorola XOOM Tablet $589 Motorola XOOM Tablet $598 Motorola XOOM Tablet $590 2 ASUS TF101-A1 $400 Samsung Galaxy Tab $350 Acer Iconia A500-10S16u $450 Apple iPad 64GB Wifi $460 3 Samsung Galaxy Tab $350 ViewSonic G-Tablet $315 Apple iPad 2 (16GB, Wifi) $594 Apple iPad 2 16GB Bk Wifi $570 4 ASUS EP121-1A010M $1099 ASUS EP121-1A010M $1350 Samsung Galaxy Tab $350 Samsung Galaxy Tab $349 5 Superpad 10.2" Tablet PC $193 Apple iPad 2 (16GB, Wifi) $610 Apple iPad 64GB Wifi $506 Acer Iconia A500-10S16u $450 6 Apple iPad (16GB, Wifi) $475 Superpad 10.2" Tablet PC $193 Superpad 10.2" Tablet PC $193 ViewSonic G-Tablet $303 7 Apple iPad 2 16GB Bl Wifi $606 Apple iPad 16GB Wifi $430 Apple iPad 2 32GB Bl Wifi $645 Superpad 10.2" Tablet PC $219 8 ViewSonic G-Tablet $320 Coby KYROS MID7024-4G $172 Apple iPad 2 16GB Wh Wifi $575 Apple iPad 2 32GB Bk Wifi $660 9 Coby KYROS MID7024-4G $179 Acer Iconia A500-10S16u $450 Apple iPad 16GB Wifi $440 Apple iPad 16GB Wifi $490 10 Apple iPad 2 16GB Wh Wifi $507 Apple iPad 2 16GB Wh Wifi $589 ASUS EP121-1A010M $1370 Apple iPad 2 64GB Bk AT&T $965 Source: Amazon.com

Figure 14: Top Netbooks on Amazon.com

Top 10 Netbooks on Amazon: May 2 May 9 May 16 May 23 1 Toshiba NB505-N508BL $278 Toshiba NB505-N508BL $278 Toshiba NB505-N508BL $278 Toshiba NB505-N508BL $275 2 Acer AOD255E-13639 $252 Acer AOD255E-13639 $252 Acer AOD255E-13639 $247 Acer AOD255E-13639 $247 3 Dell Inspiron 1018 4034CLB $285 Dell Inspiron 1018 4034CLB $285 Toshiba NB505-N508TQ $278 Toshiba NB505-N508OR $270 4 Toshiba NB505-N508OR $278 ASUS 1015PEM-PU17-BK $332 Dell Inspiron 1018 4034CLB $285 Dell Inspiron 1018 4034CLB $280 5 Toshiba NB505-N508GN $280 Toshiba NB505-N508TQ $278 Toshiba NB505-N508GN $278 Toshiba NB505-N508BN $270 6 ASUS 1015PEM-PU17 $350 Toshiba NB505-N508GN $280 Toshiba NB505-N508BN $278 HP Mini 110-3530NR $270 7 Toshiba NB505-N508BN $280 Toshiba NB505-N508BN $278 Samsung NF310-A01 $358 Toshiba NB505-N508TQ $278 8 ASUS 1001PXD-EU17-BK $250 Toshiba NB505-N508OR $278 Toshiba NB505-N600 $350 Toshiba NB505-N508GN $278 9 ASUS 1015PEM-PU17-BK $362 ASUS 1015PXD-EU17-WT $250 Acer AOD255E-1802 $276 Samsung NF310-A01 $360 10 ASUS T101MT-EU27-BK $435 Samsung NF310-A01 $358 Toshiba NB505-N508OR $278 HP Mini 110-3510NR $250 Source: Amazon.com

24 May 2011 12 Barclays Capital | Apple, Inc.

Figure 15: Amazon Top 10 Netbook & Tablet ASP Weekly Trend (Average ASP of top 10 Netbooks/Tablets for sale) 2011

$650

$600

$550

$500

$450

$400

$350

$300

$250

$200

0 4 7 5 2 1 2 y 2 y y y 14 y 28 il 18 ay y 16 y 23 ary 3 ar rch 7 r a a u ar ar u a April 4 pril 11 p M May 9 uar uar M A A April M M Jan r r March 14 Janu January 18Janu January 31Febr Feb FebruaryFeb 22

Netbook Tablet

Source: Barclays Capital & Amazon.com

24 May 2011 13 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. On September 20, 2008, Barclays Capital acquired Lehman Brothers' North American investment banking, capital markets, and private investment management businesses. All ratings and price targets prior to this date relate to coverage under Lehman Brothers Inc. 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, 20-May-2011, USD 335.22), 1-Overweight/1-Positive Information contained in this report from The NPD Group, Inc. and its affiliates is the proprietary and confidential property of NPD and was made available for publication herein by way of limited license from NPD. Such NPD data may not be re-published in any manner, in whole or in part, without the express written consent of NPD. 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. (TDSC) 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:

24 May 2011 14 Barclays Capital | Apple, Inc.

IMPORTANT DISCLOSURES CONTINUED Barclays Capital Inc. Equity Research has 1741 companies under coverage. 43% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 52% 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; 45% of companies with this rating are investment banking clients of the Firm. 12% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 35% 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)

24 May 2011 15 Barclays Capital | Apple, Inc.

IMPORTANT DISCLOSURES CONTINUED Apple, Inc. (AAPL) Stock Rating Sector View USD 335.22 (20-May-2011) 1-OVERWEIGHT 1-POSITIVE Rating and Price Target Chart - USD (as of 20-May-2011) Currency=USD

Date Closing Price Rating Price Target 500 20-Apr-2011 342.41 465.00 450 18-Jan-2011 340.65 450.00 400 12-Jan-2011 344.42 420.00 350 18-Oct-2010 318.00 390.00

300 12-Oct-2010 298.54 385.00

250 21-Jul-2010 254.24 340.00 22-Jun-2010 273.85 325.00 200 01-Jun-2010 260.83 320.00 150 21-Apr-2010 259.22 315.00 100 08-Apr-2010 239.95 300.00 50 27-Jan-2010 207.88 285.00 Ju l - 0 8 Ja n - 0 9 Ju l - 0 9 Ja n - 1 0 Ju l - 1 0 Ja n - 1 1 26-Jan-2010 205.94 265.00 Closing Price Target Price 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 17-Nov-2008 88.14 113.00 06-Nov-2008 99.10 121.00 22-Oct-2008 96.87 125.00 03-Oct-2008 97.07 135.00 29-Sep-2008 105.26 180.00 22-Jul-2008 162.02 220.00 10-Jun-2008 185.64 234.00 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 shares 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 $465 based on 14x our FY12 EPS estimate of $28.00 excluding interest income but adding back cash. 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.

24 May 2011 16

This publication has been prepared by Barclays Capital, the investment banking division of Barclays Bank PLC, and/or one or more of its affiliates as provided below. It is provided to our clients for information purposes only, and Barclays Capital makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. Barclays Capital will not treat unauthorized recipients of this report as its clients. Prices shown are indicative and Barclays Capital is not offering to buy or sell or soliciting offers to buy or sell any financial instrument. 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