Today: Apple (AAPL) invite seems to signal imminent arrival of "iPad Mini," sparking investors to push company's stock higher even as Microsoft announces pricing of its iPad rival. Also: Intel's (INTC) earnings report sends stock down in late trading after day of big gains on Wall Street.
Apple seems ready to launch iPad Mini as tablet war forms
The second round of reports turned out to be true Tuesday, as Apple invited media members to an Oct. 23 event expected to be the introduction of an "iPad Mini," sending the company's recently wounded stock to a solid rebound on the day.
Members of the media received invitations Tuesday with a multicolored graphic that shows the top of an Apple logo and the tagline, "We've got a little more to show you." The key word in that tagline is "little," as reports have abounded of late that Apple is in production on a smaller iPad, with a 7.85-inch screen instead of the 9.7-inch diagonal measurement on the screen of Apple's popular tablet offering. Technology-focused blogs have also reported that Apple will show off a smaller MacBook Pro with Retina Display, offering a 13-inch version of the machine, which currently only has a 15-inch model.
Besides the tagline, one of the only other hints of Apple's intentions with the event is the venue: San Jose's historic downtown California Theatre. Apple has not held an event at the space since 2005, but the two events it has held there featured entertainment-focused offerings: the 2004 debut of the U2 iPod special edition, which also included the first digital boxed set of music on iTunes; and the 2005 introduction of the first iPod with video capabilities and television offerings on iTunes.
If Apple does introduce an iPad Mini, it could market the new product as a direct portal for the media offerings in iTunes, to rival Amazon's Kindle line of tablets, which the e-tailer uses to push up sales of its digital content. Amazon's Kindle was the first large seller in the smaller category of tablets when it was introduced last year, but it was recently joined by Google's (GOOG) Nexus 7.
The market for smaller tablets is not large yet: Piper Jaffray predicts tablets measuring about 7 inches will represent 20 percent of tablet sales in 2012 with that percentage increasing only to 25 percent by 2014. However, analysts believe that Apple's move into that market will solidify their hold on the market -- Apple currently sells about 60 percent of tablets in the world.
"These competitors have a tough enough time competing against the 10-inch iPad," Stern Agee analyst Shaw Wu said last week. A smaller version "will make the competition even tougher. It tells you how hard it is to beat Apple. These other companies have to either lose money or break even on these products."
Wu predicts that Apple could sell the smaller tablet for about $299 to $349 while continuing to gain similar profit margins to the Cupertino company's other devices. "The biggest cost in a tablet is the display," he told Reuters. "On a mini, the display will be a bit cheaper."
While that price point would make an iPad Mini more expensive than the Kindle and Nexus 7, which start at about $199, they would be much less expensive that the larger iPads.
Apple's competitors aren't standing still, however: Microsoft announced that its foray into tablets will produce hardware with a lower initial price point than Apple's larger iPad, with a 32-gigabyte Surface starting at $499 when it launches Oct. 26, $100 cheaper than the comparable Apple product. Microsoft is not including its Touch Cover keyboard in that cost, however, so adding the feature most reviewers thought was the most significant development from Microsoft will make the machines cost roughly the same.
"Everything is pulling tablet prices down to below $500, so anything over $500 -- that is a tablet that is going to look expensive," IDC analyst Bob O'Donnell told Bloomberg News.
Even beleaguered electronics retailer Best Buy is reportedly getting in the act, as Reuters said Tuesday that it would introduce a 10-inch tablet of its own running Google's Android operating system.
Investors, though, are betting that Apple will continue to lead in the tablet sector while the others follow, as the company's stock -- suffering since the iPhone 5 launch late last month on concerns about production delays -- soared after the invitations were sent out Tuesday. Apple shares closed at $649.79 Tuesday after a gain of 2.4 percent, a welcome reprieve after the stock dropped 9.4 percent between the Sept. 21 launch of the iPhone 5 and Tuesday's session.
Intel's earnings decent, but projections scare investors
As doubts about the personal-computer industry persist, Santa Clara chipmaker Intel announced third-quarter earnings that lived up to the diminished expectations of analysts, but weak fourth-quarter projections sent the company's stock down in after-hours trading.
The world's largest maker of computer processors announced Tuesday that it earned 58 cents per share on sales of $13.5 billion in the third quarter. While that was an 11 percent decrease in earnings and a 5 percent drop in sales from the same period a year ago, it still beat Wall Street expectations of 49 cents a share and $13.2 billion in revenue.
However, Intel predicted that it would pull in gross profit margin of 57 percent in the current quarter, far below the 61.4 percent analysts expected, with revenues possibly as low as $13.1 billion.
"Intel's outlook confirms fears that the PC slowdown is likely to continue," said Bill Kreher, an analyst at Edward Jones & Co. "The gross margin is well below our view."
The diminished earnings for the fourth quarter are especially disappointing because it signals that the holiday shopping season and introduction of Windows 8 this month are unlikely to shake the PC industry out of its current slump, which could lead to declines for major PC companies in Wednesday trading.
Intel increased for the second consecutive trading session Tuesday, growing 2.9 percent to close at $22.35. However, Shares decreased more than 3 percent in late trading.
Big day for Wall Street as tech stocks zoom higher
The rise of Apple and Intel in regular trading and strong earnings reports from Mattel, Goldman Sachs and Johnson & Johnson pushed Wall Street to big gains on Tuesday. The Standard & Poor's 500 and Dow Jones indexes had their best one-day gains in a month, and the tech-heavy Nasdaq outpaced them both with a 1.2 percent gain.
"Investors are cycling back into risk as earnings as well as economic numbers in the U.S. are somewhat better than expected," Stifel Nicolaus fund manager Chad Morganlander told Bloomberg News.
Tech stocks were especially strong, with the SV150 index of Silicon Valley's largest tech companies gaining 1.9 percent on the day. Traditional local tech powers like Oracle (ORCL) (up 1.8 percent), Cisco (CSCO) (up 1.6 percent) and Hewlett-Packard (HPQ) (up 0.7 percent) all gained on the day.
Yahoo (YHOO) increased 1.5 percent one day after CEO Marissa Mayer snagged a new chief operating officer from her former company Google, despite reports that it would force out another high-ranking executive. LinkedIn introduced a new homepage design and profile style, but it advanced only 0.3 percent as social stocks had a rough day -- Facebook dropped 0.2 percent and Yelp declined 1.8 percent.
IBM followed Intel's path, gaining 1 percent in regular trading, but falling more than 3 percent after-hours following an earnings report that was solid but unspectacular. Microsoft's Surface announcement didn't have the same effect as Apple' invite, as the Washington tech giant lost 0.1 percent.
Silicon Valley tech stocks
Down: Advanced Micro Devices, Yelp, Splunk, Facebook
The tech-heavy Nasdaq composite index: Up 36.99, or 1.21 percent, to 3,101.17
The blue chip Dow Jones industrial average: Up 127.55, or 0.95 percent, to 13,551.78
And the widely watched Standard & Poor's 500 index: Up 14.79, or 1.03 percent, to 1,454.92
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.