Analyst Sees Apple Selling Video, But Such Speculation is "Premature"

| Reports

Merrill Lynch First Vice-President Steven Milunovich has issued a research report recently obtained by The Mac Observer. In it, Mr. Milunovich addresses recent speculation that Apple will begin selling digital video downloads, noting that "Netflix has said that given Appleis recent hiring and lease of space, the company has designs on subscription video of some kind." However, he also says that "concerns about what Apple does next seem premature."

Mr. Milunovich also observes that "music videos have been on sale through Appleis iTunes Music Store since last week" and that "the music industry doesnit have an outlet to sell music videos and would likely cooperate with Apple." However, it should be noted that Apple isnit selling any music videos -- theyire only available to watch on the store, not as part of the downloaded music.

In other areas of recent Apple news, Mr. Milunovich addresses The Wall Street Journalis report that Apple may switch to Intel chips. He notes that "historically, changing chip architecture has been very difficult and painful," but he does see a benefit "in notebooks, where Apple has said that heat dissipation makes it difficult to put a G5 into a laptop. Still, weid be surprised to see a wholesale switchover to Intel processors with Mac momentum finally kicking in."

Following that thought, Mr. Milunovich says that Best Buy is "off to slow Mac mini start. Store managers told us that PC users are reluctant to make the switch to Mac and are opting for low cost PCs like eMachines. Some store associates said they are at a disadvantage with Macs because Best Buys donit carry software for Apple." However, he sees "solid" sales of the computer at Apple stores.

Mr. Milunovich reiterates his recent "Buy" rating on the companyis stock, although he does assign it a high volatility rating. His price objective is US$51 per share.

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