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Monday, October 03, 2005, 07:00 am PT (10:00 am ET)

Apple may sell 10 million iPod nanos this quarter

Apple may produce and sell more than 10 million of its new iPod nano digital music players during the three month period ending in December, says UBS Investment Research.

For Apple's quarter ending in June — the last fiscal quarter in which it has released results — the company sold a combined total of 6,155,000 iPods, which is the most iPods its ever shipped in a single quarter.

UBS had been modeling Apple to sell 8.3 million total iPods in the December quarter, but recently met with industry sources in Asia who said those estimates may prove to be conservative. The firm's sources indicate iPod nano build orders for the quarter could exceed 10 million units. Apple sells various other iPod models which would only add to this figure.

"In short, our meetings were very positive for Apple into year-end and next, in terms of potential new iPods and possible build plans," said analyst Ben Reitzes in a research note released to clients on Monday.

The Wall Street analyst believes an increase in expected iPod sales could add as much as 10 cents to consensus earnings-per-share estimates for the quarter, which are currently at 45 cents.

Meanwhile, Reitzes also believes Apple may produce a new hard disk drive (HDD)-based iPod before the end of the year.

"Our checks back recent reports that a handheld device capable of video playback could be in the works," the analyst said. "We would expect possible new devices to be HDD-based and look a bit like a larger white iPod with a bigger color screen."

However, UBS estimates Apple will sell only 4.5 million HDD-based iPods in fiscal year 2006, which would be down 30% year-over-year, due primarily to potential cannibalization from flash based players such as the nano.

UBS also said it sees momentum building for Apple's portables and iMacs:

"Our checks in Asia back this view, implying that sales of portables for Apple (particularly iBooks) are solid, which could make our estimates for overall Mac growth of 41% in 4Q05 and 28% in 1Q06 look
conservative," the firm said.

UBS continues to rate Apple a "Buy" with a price target of $64.