Analyst Raises Q406, FY07 Estimates on MacBook Sales Strength

Credit Suisse analyst Robert Semple on Monday cited MacBook sales strength as he raised his estimates for Appleis current quarter, which is the fourth of its 2006 fiscal year, as well as for the companyis next fiscal year, which begins Oct. 1. He expects Apple to sell at least 775,000 of the new laptops this quarter, well over the 580,000 units he initially estimated. As a result, heis adding US$215 million to his original $4.6 billion revenue estimate for this quarter.

In addition, Mr. Semple bumped his FY07 revenue expectation from $22.03 billion to $22.65 billion. He wrote: "We believe the MacBook is resonating well at both educational institutions and with students during the back-to-school period. Furthermore, the productis $1,099 price point addresses approximately 50% of the notebook market." He based that percentage on the number of laptops sold at that price point or lower.

Mr. Sempleis laptop chart

In contrast, he said, Appleis iMac "now addresses 12% of the desktop market following last weekis price cut to $999 from $1,199. It is important to note that the table [provided in the research report] does not include monitors sold with desktop PCs, so Apple is effectively penalized for including the monitor as an all-in-one PC.

"Adjusting for this, we estimate Apple addresses over 20% of the desktop market with its iMac and roughly 80% of the market if the Mac mini is included."

Mr. Sempleis desktop chart

Mr. Semple concluded: "We continue to believe the Mac is in the early stages of a multi-year share gain story, as we should see customer attrition from Microsoft PC users who have had positive experiences with the iPod make the switch to Macs. It is easy to write off the ihalo effecti by looking at Appleis small share gains over the past three years (40 bps), but we caution that iPod demand only reached critical mass in September 2004 and didnit explode until 2005.

"When this is taken in the context of the consumer PC replacement cycle that currently stands at over 4 years, we believe there are millions of users poised to make the shift over the next three years as they begin to upgrade their computers within the confines of a normal replacement cycle."

The analyst retained his $90 price target on Appleis stock, along with his "Outperform" rating. At 2:24 PM EST on Monday, the companyis shares were selling for $73.07, up 0.76% amid a broader Nasdaq rally. Anticipation is high ahead of Appleis Tuesday media event, during which new iPods and/or a movie download service are expected to be unveiled.

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