UBS: Mac Sales a Surprise

UBS investment analyst, Ben Reitzes, was pleasantly surprised by the number of Macs Apple sold during the second quarter of 2006, but disappointed by the lower than expected iPod sales. 2006 likely marks a revenue "trough" for Apple, but yet to be released products will help the company out.

The Mac and iPod maker posted higher than expected 2Q earnings at US$0.47, above the UBS estimate of $0.43. Revenue for the quarter, however, was below expectations by about $110 million at $4.359 billion.

The number of Macs sold came in at 1.1 million units, noticeably above Mr. Reitzes prediction of 979,000. The strong Mac growth during the transition from PowerPC processors to Intel processors adds a positive outlook to future share gains potential.

iPod sales didnit fare as well in Mr. Reitzes eyes. UBS was looking for an aggressive 9.6 million units sold, but the actual number came in at 8.5 million. One contributing factor to the lower than expected sales was the fact that there was one week less in this selling period. An additional week would have likely added another million units to Appleis bottom line, bringing iPod sales in line with his estimates.

UBS is adjusting its estimates to reflect lower iPod sales, partially offset by higher Mac sales. The third quarter revenue estimate is now $4.4 billion, down from $4.6 billion, based on a 24 percent year-over-year growth. EPS values are also lower, dropping from $0.47 to $0.42.

Fiscal 2006 estimates have been reduced from $19.9 billion to $19.3 billion, with an EPS of $2.03 instead of $2.10. Fiscal 2007 has also been adjusted down to $24.1 billion from $25 billion, with an EPS of $2.60, down from $2.70. Appleis target value is also being lowered from $95 to $90.

New products in the Mac and iPod pipe lines will likely boost Appleis bottom line, and UBS is maintaining its "Buy" rating.

Apple stock is currently trading at $68.06, up 2.41 (3.67%).

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