Analyst on March quarter

Apple is due to report its March quarter results after the market closes on Wednesday, and research firm Piper Jaffray expects a slight upside to Wall Street's consensus revenue of $5.2 billion for the Cupertino-based company. The firm also believes favorable component pricing will provide upside to Street expectations of $0.63 earnings-per-share, and that Apple sold around 1 million iPods during the March quarter over Wall Street's predicted 10.7 million. Based on checks with Apple resellers, research analyst Gene Munster of Piper Jaffray expects a slight quarter-over-quarter decline of between 5-10 percent vs. Wall Street's expectation that Mac units will fall 10 percent. Piper Jaffray maintains its 'Outperform' rating on Apple shares with a $123 price target.

"We may see a slight upside to consensus of 1.45 million Macs," Munster noted. "Apple typically guides conservatively and we believe the company will guide in line, at best, with Street consensus for the June quarter."

"Apple announced the sale of the 100 millionth iPod on April 9th, which implies slight upside to the Street's expectation of 10.7 million units," said Munster. "Subtracting total iPod units reported through December 2006 (89 million units) from the 100 million units, and accounting for the nine days in April, implies second quarter iPod units of 11 million."

The analyst recently spoke with 20 Apple resellers, discovering that 85 percent are expecting a slight quarter-over-quarter decline of between 5-10 percent in Mac sales. The other 15 percent of Mac resellers expect Mac units to remain flat quarter-over-quarter, which could lead to a slight upside ahead of Wall Street's expected 10 percent decline in Mac sales.

Mac market share

"Based on two rounds of checks with 50 retail stores selling Vista and Vista-enabled PCs, we expect IDC Mac market share will decline from 2.5 percent in December to 2.3 percent in March," the analyst said, citing recently released Gartner data for PC shipments in calendar quarter 1. "We expect market share to bounce back quickly in the June quarter."

Munster expects market share to bounce back quickly in the June quarter, however, based on three key factors that will help the Cupertino-based company grow its Mac market share. Apple's dominance in the portable category will benefit Mac market share as the industry continues to shift towards laptops; iPod and iTunes users are increasingly switching to Macs, according to the analyst, because Mac systems offer superior media management; and Apple is building a healthy Mac brand.

"Despite these factors, we estimate the PC upgrade cycle to be four years, so these factors will result in mid to long term market share gains as computer buyers work through the upgrade cycle," said Munster, noting also that Apple TV sales will not materially impact the March quarter and that Leopard will likely cause little to no delay of Mac purchases ahead of the operating system's planned release in October.

by MacNN Staff