UBS analyst Maynard Um expects Apple's iPhone 3G shipments for the quarter may fall below his 5 million unit estimate, and that the company may be preparing to release a 4GB version of its popular combination iPod and smartphone.

"We believe iPhone shipments could be below our 5 million unit forecast but our UBS semis team and our checks indicate a new 4GB iPhone which may be helping to increase build rates (about 7 million in Q1 and initial 2009 plans of about 23 million –- relatively good numbers)," Mr. Um said. "However, we caution that build rates have seen cuts in the past and may change and worry units could be driven at the expense of ASP and margins partially due to cannibalization." 

He added that Apple's quarterly revenue will likely fall in the company's guided range of US$9 to $10 billion thanks to the recently updated MacBook along with holiday promotional sales. Gross margins for the quarter are expected to come in above Apple's 31 percent guidance in part because of component pricing and an EPS above or near $1.35.

Looking forward, Mr. Um expects Apple will offer a wide and conservative guidance range for the second quarter with a gross margin target around 30 percent.

Mr. Um is maintaining his "Neutral" rating and $110 target price for Apple's stock. Apple is currently trading at $86.43, down 1.28 (1.46%).