Piper Jaffray Calls Rumors of Sub-$500 Mac "Not Out of the Question" [UPDATED]

| Apple Stock Watch

Piper Jaffray analyst Gene Munster commented on rumors of a new, inexpensive iMac Thursday saying it is "not out of the question" for Apple to release such a product.

Various Mac rumor Web sites began to report on Wednesday news of a sub-$500 iMac Apple is expected to announce at Mac Expo in San Francisco. Reports said the new iMac will use a G4 processor at around 1.33Ghz in speed and come with a Combo drive, 256MB of memory, and a suite of software including iLife i05.

Mr. Munster commented he would view the introduction of a US$500 iMac "positively" and wrote that an inexpensive Mac "would appeal to many potential iswitchersi that would likely not make the move at a $1,299 price point, but would consider a $500 product."

His opinion is based on Piper Jaffrayis belief that "Windows iPod owners and PC users irritated by security concerns," and "are more apt to buy a Mac now than in the recent past." According to Mr. Munster, Apple could capitalize on that with a low-end entry Mac.

If the rumors end up not being true, Piper Jaffray is keeping to its estimates that Windows-using iPod owners will Switch at a rate of 13%.

While several Wall Street analysts have made note of the iPod Halo Effect, Mr. Munster has been the most bullish on the note. His prognostications are based, in part, on a survey conducted by Piper Jaffray that found a high percentage of iPod users thinking positive thoughts about other Apple products, including the Mac.

Mr. Munster also went on record to say he expects Apple to sell 68.5 million songs through the iTunes Music Store during the December quarter, and that Apple will release a flash-based iPod, perhaps as early as Januaryis Macworld San Francisco. He did not offer any opinion on when the company might release this supposed inexpensive Mac, but noted again in Thursdayis client advisory that he expects Apple to make some new announcements at the show, and that the company has done so in the past.

Piper Jaffray has not changed its 12-month target for Apple, which is currently at $100, the highest of all Wall Street brokerages. Mr. Munster wrote simply that if the rumors are true, then it would accelerate the potential iPod Halo Effect, the school of thought that some Windows-using iPod owners will Switch to the Mac.

Appleis stock closed Thursday at $64.80, up 0.36, or 0.56%, on moderate volume.

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