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Monday, September 26, 2005, 10:00 am PT (01:00 pm ET)

UBS dissects 4GB iPod nano, raises Apple price target

UBS Investment Research on Monday updated its price target on Apple shares after tearing apart and analyzing the company's new 4GB iPod nano digital music player.

The firm's analysis found the material cost on the player to be approximately 65% of its sales price, which appears to support an overall profit to Apple of at least 20% per nano.

In total, UBS estimates Apple's material cost of the $249 player to be $164.10 before accounting for costs associated with labor, warranty, phone support, logistics, procurement, depreciation, other operational overhead and fees.

"We estimate that flash NAND currently represents about 70% of the total material cost to produce the (4GB) iPod nano or about $115," analyst Ben Reitzes wrote in a research note to clients. "Other noteworthy component costs include: 1.5” color LCD screen at about $8.00 or 5% of the total cost, battery at about $6 or 4% of the total cost and PortalPlayer chip at about $7 or 4% of the total cost."

In its breakdown of the bill of materials, UBS assumed Apple's cost of 2GB of flash NAND to be $57, slightly above the $54 per 2GB cost quoted by market research firm iSuppli in its recent dissection of the 2GB nano.

Based on checks with retailers, UBS says 4GB iPod nano sales are off to a strong start, while the 2GB version seems less popular. The firm also notes that wait times for 4GB nanos have stretched to 1-2 weeks from 5-7 days a week ago on the Apple online store.

As a result of its analysis, UBS raised its price target on Apple from $59 o $64. The firm continues to rate the stock as a "Buy."