Merrill Lynch: Boot Camp Over Hyped

Merrill Lynch analyst Richard Farmer lowered his estimate for Apple product sales, predicting lower iPod sales and citing overblown expectations surrounding the release of Boot Camp. Despite his somewhat pessimistic short term outlook, he sees a positive future for the companyis long term performance.

Mr. Farmer is lowering his prediction of 10.1 million iPods to 8.8 million units sold through March. His estimate for 2006 sales is also lower at 47 million units sold, down from 53 million. iPod gross margins, however, may rise to due weaker Flash memory prices.

Mac sales for the quarter will be down, too. He feels that fewer Macs were sold since the MacBook Pro was released later in the buying season.

He also feels the market overreacted to the release of Boot Camp, Appleis software that lets Intel-based Mac users install and run Windows or Mac OS X on their computer. The possibility that consumers may choose not to purchase a Mac to run Windows is significant. He cites the extra costs of purchasing a copy of Windows XP, along with the lack of support from Apple once the software is installed as major contributing factors.

Mr. Farmer still expects the market will see some incremental increases in the number of Mac buyers, and is raising his estimate of total market share for fiscal 2007 from 3.45 percent up to 3.7 percent.

Apple stock is currently trading at US$66.76, up 0.05 (0.07%)

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