Analyst expects Apple earnings of $5.3b

Apple is likely to report revenue and earnings well above its own estimates and above Wall Street predictions for the June quarter, according to American Technology Research senior analyst Shaw Wu. The Cupertino-based company anticipated $5.1 billion in revenue with earnings-per-share of $0.66, but Wu expects $5.3 billion with earnings-per-share of $0.73 based on supply chain analysis to beat out street consensus of $5.28 billion and $0.72. "We see continued Mac strength driven by updated MacBooks and new LED-based MacBook Pros (we are modeling 1.64 million total Mac units, up 8 percent quarter-over-quarter and 24 percent year-over-year) and seasonal iPods (9.7 million units, down 8 percent quarter-over-quarter and up 20 percent year-over-year) with little signs of cannibalization from iPhone," Wu wrote in a research report obtained by MacNN. "For iPhone, we anticipate a small contribution as only two days of sales were likely recognized, coupled with Apple's use of subscription accounting." The analyst predicts a "conservative" quarter million iPhone sales in those two days, noting that the company's cellular phone sold at a much faster rate than its top-selling iPod nano -- which saw sales of nearly 60,000 units per day -- should his predictions prove correct.

"For the September quarter, we believe Apple will likely offer conservative guidance particularly with iPhone accounting and the back-to-school season, which tends to experience a mix towards lower margin products," Wu said.

The analyst is anticipating $5.8 billion in revenue for Apple's September quarter with earnings-per-share of $0.77 vs. market consensus of $6.05 billion in revenue and earnings-per-share of $0.83. Wu warns that Apple shares will likely be volatile after the company releases its June quarter financial results on Wednesday, but suggests investors take advantage if the stock pulls back based on short-term concerns.

Turning to Apple's iPhone, Wu believes the handset has the potential to be "landscape changing."

"From a bigger picture standpoint, we believe the iPhone represents the start of a potential revolution in both PC and mobile electronics industries. In our view, it is more than just a classic old school product in that it is landscape changing, being the first true convergence device that combines the best media player (widescreen video iPod), a near full-function web browser (Safari), e-mail/contacts/calendar, and a cellular phone," the analyst said. "Over the next 2-3 years, we believe Apple has the potential to become a top selling 'smart' phone vendor, which could bring this category into the mainstream, just as it did with the iPod and portable media players."

Wu carefully notes that the iPhone is not without flaws, pointing to the virtual keyboard that is "somewhat difficult to use" alongside the desire for improved battery life.

"In our extreme testing conditions (in which we were literally using the product non-stop given our excitement), we get battery life closer to 3 1/2 hours. We noticed web surfing uses up the most battery life. When we get to more normal use patterns, we envision charging the iPhone every 1-2 days, similar to other smart phones."

Pricing is also a potential issue for the iPhone, says Wu, who says $499 and $599 are "somewhat steep." The analyst hopes to see Apple round out its iPhone product line with mid-range and low-end products in a similar fashion to the company's market-leading iPod line.

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