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What to Expect When You're Expecting Apple to Rally in 2012

Evan Niu (TMFNewCow)
December 24, 2011

With the historic year that Apple (Nasdaq: AAPL  ) has had, what can we look forward to next year?

There's no shortage of speculation thanks to Cupertino's sleepless rumor mill. I've covered some of the ideas, but there are plenty more possibilities to entertain, some of which have been broached more recently. There are some reasons Apple might not rally in 2012, but I still think it's a buy.

Some are also continuing to call for a dividend, and while I think there are better uses for its dollar mountain, giving some back to shareholders is possible under Tim Cook, unlike with Steve Jobs.

Back to the future
Fellow Fool Rick Munarriz made some predictions back in 2009. He nailed it with Cook, who took the lead four months ago. The iPod business is indeed shrinking, and while Apple launched iTunes Match, an iTunes music subscription service, as predicted, it only leveraged its Lala acquisition. The iPhone continues to be the growth driver, and Apple never bothered with netbooks, instead responding with the iPad.

Retina displays for everyone!
The iPhone 4's high-resolution Retina Display caught me off guard in 2010. I initially didn't think much of it -- until I got my hands on it. Now I can never go back. The iPad 3 is widely expected to carry a Retina Display, but there are even hints that Apple will bring high-resolution to Macs, since OS X Lion has hidden "HiDPI" (high-resolution dots per inch) display modes.

"Next generation of MacBooks"
Apple was surprisingly upfront when it introduced the redesigned MacBook Air in October 2010. It called them the "next generation of MacBooks" and said, "it's really the future of the notebook." The MacBook Pro lineup is potentially set for a major redesign, and Apple might add a 15-inch version to the Air family. DigiTimes has suggested that a Retina Display 15-inch MacBook Pro is set for the second quarter, carrying a resolution of 2880 x 1800 (doubling each dimension of the current 1440 x 900).

The most obvious progression is that they will continue to get thinner. It's practically a shoo-in that Apple will transition all Macs to custom-designed enclosure-free flash storage, given the success of the MacBook Air. Its recent acquisition of an Israeli flash-memory specialist is more than a hint.

Next year, I'm expecting Apple to begin transitioning all Macs, starting with laptops, to all SSD and Retina displays, while continuing to make them thin enough to cut food with (just because you can doesn't mean you should).

iPads for everyone!
There's a good chance that's (Nasdaq: AMZN  ) assault from below will spark Apple to broaden the iPad lineup and include a lower price point. Early estimates pegged the iPad market share near 75% this year, but research firm IDC believes that may fall to less than 60% in the fourth quarter, because of the relative success of the Kindle Fire and Barnes & Noble (NYSE: BKS  ) Nook family.

Other Google (Nasdaq: GOOG  ) Android tablets that have gone head-to-head with the iPad, like the Motorola Mobility (NYSE: MMI  ) Xoom, have always come back with their tail between their legs. The only success stories come at low price points, like with Hewlett-Packard's (NYSE: HPQ  ) $99 TouchPad.

Expanding the iPad to lower price points in defense might promptly quell the uprising. There are a few routes Apple may take. It may simply offer the previous-generation model at lower prices, as it has done with the iPhone, or it may even go with a 7-incher, despite Jobs' previous assertion that the 7-inch form factor is "dead on arrival." I think we'll see the iPad 2 move down in price instead of a 7-inch model.

Enough about products; get to the bottom line
Last fiscal year, Apple cleared $108.2 billion in sales, a 66% jump. On average, analysts estimate