Merrill Lynch Raises Apple's Q1 Earnings Estimate

Merrill Lynch analyst Steven Milunovich raised his estimates on Apple Computer (AAPL) stock Wednesday after the company unveiled the iPod Photo and a special edition U2 iPod on Tuesday.

Citing increased iPod shipments, Mr. Milunovich raised the estimate for the fiscal first quarter ending December to earnings of 42 cents per share on revenue of $2.95 billion, up from earnings of 40 cents per share on revenue of $2.85 billion.

In his comment report, obtained by The Mac Observer, Mr. Milunovich wrote that while the prices for the two new models - US$499 for the iPod Photo and $349 for the special edition model - appear a little high, "that was the initial reaction to the iPod mini," and that it will have little affect on sales.

Mr. Milunovich reiterated earlier statements that Apple believes it is seeing an "halo effect" on Macintosh PC sales as a result of iPod interest and sales, but neither he nor Apple have provided factual evidence to base this claim.

On Monday, the Merrill Lynch analyst released a detailed report on Appleis overall iPod strategy. In it, Mr. Milunovich predicted Apple would release of photo-based iPod in the first half of 2005. The product was released more than 60 days earlier than that. In addition, he predicted a flash-based iPod would be announced in "the first quarter of 2005," he wrote.

Mr. Milunovichis comments came after recently visiting with Appleis Chief Financial Officer Peter Oppenheimer, Vice President of iPod Product Marketing Greg Joswiak, and Chief Software Technology Officer Avie Tevanian. "We came away with continued confidence that Apple is pursuing realistic fiscal goals and that innovation is not slowing," he wrote.