Apple Q2 to Beat Street Estimate; shuffle Supply Improves

Three days before Apple Computer announces its fiscal second-quarter results, Piper Jaffray & Co. analyst Gene Munster said Monday the iPod maker continues to dominate the digital music market and will beat the consensus estimate of earnings in the previous quarter.

Mr. Jaffray estimated Apple will beat the Thomson First Call estimate of 23 cents a share on US$3.20 billion in revenue, but only "slightly." He predicted an earnings result of 24 cents a share on revenue of $3.17 billion.

"Based on continued strong demand being met by, what we expect will be more consistent supply, we believe June quarter guidance will be above Street consensus," he told clients in a report obtained by The Mac Observer. "Significant focus has been placed on iPod units for the quarter, and we believe some street unit estimates have become over-aggressive due to activities seen from component suppliers in the quarter. While clearly a critical piece of the overall picture, due to iPod shuffle supply inconsistencies in the quarter, we believe it is prudent to focus on overall March quarter results and June guidance."

A check of 20 independent Apple dealer in the U.S. showed demand for the iMac, Powerbook, Mac mini, and various versions of the iPod "were solid" in the March quarter, except for models of the professional Power Mac.

"This was the most positive we have heard the channel in the last 3 quarters," he wrote. "Any complaints were primarily related to lack of supply of Mac mini and iPod shuffle and weak sales of Power Mac."

Mr. Munster said that at the beginning of March, 30 checks with Apple retail stores indicated that supply constraints had eased on the iPod shuffle from earlier in the quarter.

Mr. Munster remains positive on the "big picture" for Aplpe through the remainder of 2005.

"Appleis domination in digital music is a critical piece to the story, but we do not believe that iPod is the only potential growth avenue for the company," he commented. "Indirectly, we expect iPod to be a foundation for growth in other parts of Appleis business, and we expect that by the end of (calendar year 2005) more than 30 million iPods will have shipped, providing Apple with a greater scope of awareness for various products. In our view, 500,000 more or less iPods in any given quarter will be inconsequential in the context of Appleis long-term overall business."

Piper Jaffray maintains an ioutperformi rating on Apple (AAPL).