Powered by iPod, Apple to split stock

CAMBRIDGE -- As a home and work user of traditional personal computers, Stephanie Burnham would never have had much reason to set foot inside the Apple Computer Inc. store at the CambridgeSide Galleria.

But as a recent convert to the Apple iPod music player, Burnham, a 33-year-old marketing executive from Boston, was back yesterday for another visit, this time to buy a pair of iPod speakers as a Valentine's Day present.

''As someone who's in marketing, I should have a better answer to the question of what I think makes Apple so great, but the real answer is: It's the cool factor," Burnham said. ''They absolutely have the best product features and the best online service for music." She's not ready to make a switch, because she's locked in to Microsoft Windows-based computing at work, but being back around Macintosh computers in the showroom also reminded her of how much she liked the Apple computer she had 15 years ago.

Thanks to the various models of iPod, Apple has found the powerful crossover product it has been seeking for decades to reach out to the roughly 95 percent of Americans, like Burnham, who don't use its computers and would have no excuse to visit its stores. The torrid sales of iPods, and indications Apple is starting to convert new iPod owners into Macintosh computer buyers, helped drive yesterday's decision by Apple to make its first stock split in five years.

The 2-for-1 stock split will take effect Feb. 18, with new shares trading starting Feb. 28. After a one-day gain of $2.85 after the split news came out, Apple shares closed at $81.21 yesterday, almost quadruple their low of $21.89 a year ago. Apple was the second-best performing stock among the Standard & Poor's 500 last year.

First introduced in October 2001, iPods now account for more than one-third of Apple's sales and an even larger share of its net profits, according to company reports and financial analysts. Apple says it gets 1 million visitors a week to its 100 company-owned retail stores, which include three Bay State locations.

For many buyers interviewed at the Cambridge store, the iPod was either the first product Apple has managed to sell them or represented an extension of their longstanding loyalty to Apple computers.

But some indications are emerging that the iPod may be a vehicle for Apple to start increasing its 2 percent share of the worldwide computer market. In the last quarter, Apple shipped more Macintosh computers -- 1.05 million -- than any quarter in the four previous years. Its 16 percent growth in shipments of US personal computers exceeded the overall 11 percent market uptick, according to Bloomberg News data.

Apple's $500 Mac Mini computer with 40 gigabytes of storage is the top-selling computer currently at Amazon.com, and Apple makes four of the top five most popular selling computers there.

In a November survey, money managers Piper Jaffray & Co., found that 6 percent of iPod users had switched from a standard personal computer running Microsoft Corp.'s Windows operating software to an Apple Mac, and another 7 percent planned to switch in the coming year.

''They're making all their money from the iPod. That's why the stock is through the roof," said Ross Hunter, 30, of Boston's North End, who visited the Apple store at the CambridgeSide Galleria to buy a wireless home network system. He already owns an Apple desktop, laptop, and iPod.

But Hunter said he can envision many consumers getting hooked on Apple through the iPod. ''There's a lot of brand loyalty. People who are Apple people are Apple people," Hunter said. ''It's a better computer. You get what you pay for."

Apple itself clearly hopes the iPod, which it has been making for three years, will get people to give another look at the computers it has been making for 30. In the display window at its Galleria store, where it is promoting the new iMac G5 computer, store managers recently put up a new motto: ''From the creators of iPod, the new iMac G5."

But even after a torrid Christmas shopping season, lunch-hour traffic at Apple's Cambridge store indicated the iPod remains a healthy sales driver all by itself, including the scaled-down $99 iPod Shuffle. ''They look great," said Ben McLucas, 17, who was in town on a skiing vacation from Manchester, England, and bought a Shuffle as a gift for a friend.

iPods also appear to be one more reason for consumers to cement their loyalty to Apple generally.

John Glyphis, 54, of Somerville, a fund-raising consultant for nonprofit organizations, has been using Macs since 1984, and his 14-year-old son Daniel just bought his first iPod. ''Their stuff is expensive, but I've always found that Apple is really great," Glyphis said.

Before the 2000 stock split, Apple also had a 2-for-1 split in May 1987. Stock splits do not make owners any wealthier -- they get two shares worth $40 each instead of one worth $80 -- but are commonly seen as a leading indicator the company expects to keep improving earnings.

''The momentum behind iPod and the new Mac products continue to bode very well for the company to exceed expectations in the next several quarters," said Steve Lidberg, an analyst with Pacific Crest Securities, a Portland, Ore., technology investment bank.

Peter J. Howe can be reached at howe@globe.com.