Merrill Optimistic on G5 iMac Sales; Retail Store Future Bright

Merrill Lynch analyst Steven Milunovich raised many of his unit estimates Tuesday on a handfull of Apple Computer products, pointing to better than expected demand and supplier component availability.

In a research comment to clients, Mr. Milunovich said demand for Mac laptops is strong.

"We are raising our December laptop numbers from 500,000 to 600,000," he wrote. "For (Fiscal) 2005, we moved up our total from 1.96 million to 2.13 million."

Mr. Milunovich believes there are clear signs that laptop sales for Christmas will be better than expected, including comments from Americais top electronics retailer, Best Buy, that they are optimsitic notbook sales will be "hot". Best Buy is not a retailer of Apple laptop models.

He also raised his estimates from 3.0 million units to 3.5 million on Apple iPod sales, and boosted his estimate on G5 iMac sales from 240,000 units to 250,000. He expects Apple to sell 900,000 of the flat-panel iMacs in Fiscal 2005, up from 874,000.

"Shipping delays on Aplpeis website (for the G5 iMac) have improved and are now at 5-7 days for the two lower end models and 1-2 weeks for the 20-inch version," he wrote.

Mr. Milunovich also said he is not worried about suppliers being able to meet Appleis demand for parts. He mentioned that Hitachi, makers of the 1-inch hard drive used in the iPod mini, has moved up production 50%, and white iPod hard drive maker Toshiba has also doubled production to meet Appleis demands.

The Merrill analyst also showed positive signs that Apple retail stores are profitable and will remain such. "The major risk in the store strategy is past," he wrote. "Sales per square foot are comparable to Circuit City though behind industry-leading Best Buy."

In addition, the Wall Street analyst raised his estimate for revenue in the quarter to US$3.2 billion from $2.95 billion and now sees earnings per share at 45 cents. The broker lifted its target price on the stock to $61.

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