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Tuesday, June 13, 2006, 07:55 am PT (10:55 am ET)

Apple upgraded by Needham on \"switcher\" outlook

Analysts for Needham & Co. upgraded shares of Apple Computer, Inc. to Buy from Hold after a new study showed the company's Boot Camp software has the potential to nearly triple its US PC market share.

In a recent survey commissioned by the firm, 8 percent of Windows users in the U.S home market said they would switch to a Mac if it could also run Windows. Such a shift in consumer preference would effectively increase Apple's share of the US and European home markets to 12.2 percent, the firm said.

"An increase of this magnitude would almost triple Apple’s share in the home market and increase it 75 percent worldwide," said analyst Charles Wolf. "Although a seemingly small percentage, it nonetheless dwarfs Apple’s current share of the home market."

Earlier this year, Apple announced plans to include a piece of software with the next version of its Mac OS X operating system that would allow Intel Macs to also run operating systems from rival Microsoft Corp. The software is currently code-named "Boot Camp" and available as a public beta.

Needham's survey also indicated that the Mac’s ability to run Windows could give the so-called "halo effect" a terrific boost — over 20 percent of Windows users who own iPods indicated they would make the switch.

"The good news from Apple's perspective is the iPod's penetration rate among Windows users in our survey was only 13.6 percent despite worldwide iPod sales of over 50 million since the product was introduced in October 2001," Wolf added. "Our long-term forecast has the penetration rate of all music players (including the iPod) reaching 50 percent in the US in the 2010 to 2012 time period."

Still, the analyst warns that the Mac market share gains predicted by the survey will not occur in a vacuum. "It will fall on Apple’s shoulders to translate them into reality," Wold said. "We believe the Apple Stores could play a pivotal role in this effort. Hoards of Windows users visit the Apple Stores — at least half of all visitors, according to some estimates."

Needham has a $90 price target on shares of Apple.