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Wednesday, June 21, 2006, 06:00 am PT (09:00 am ET)

UBS raises Mac sales estimates

Analysts for UBS Investment Research on Wednesday increased their forecast for Mac unit sales during Apple Computer's third fiscal quarter after checks showed solid education buying and increasing interest in the company's MacBook notebook line.

"Given indications of solid demand for new Macs, prospects for new products next quarter and an increasing shift of consumer interest to Macs, we are raising our Mac estimates," analyst Ben Reitzes told clients in a research note.

Reitzes now expects Apple to sell 1.32 million Macs during its third (June) quarter, up from 1.24 million units — representing unit growth of approximately 12 percent yearly or 19 percent quarter-to-quarter. The analyst also increased his fiscal year 2006 and 2007 total Mac unit sales estimates to 5.1 million and 6.7 million units, up from 5 million and 6.3 million units, respectively.

"Our colleagues in Asia who attended the recent Computex trade show in Taiwan indicated that discussion with vendors showed Apple continues to stand out with strong PC orders in China and Taiwan, despite the overall weakness in PC orders," Reitzes wrote. "Notebook casing maker Jutang also confirmed the MacBook is ramping up volume currently [and Jutang is] on track to ship 500K units in 1H06 (starting May), and a total of 1 million units in 2006, accounting for only a portion of total sales."

On the flip side, Reitzes said his checks continue to show that the overall digital music player market is decelerating a bit from year-end, with subdued demand for iPods coupled with "plenty of inventory" from several vendors.

"We believe our checks back weaker than expected sales for iPods in Apple’s recently reported fiscal 2Q and lower production figures from industry sources," he wrote. "These views from our 'Retail Rumblings' reports have also been supported by recent NPD data which shows US iPod sales tracking slightly below our expectations."

As a result, Reitzes cut his iPod unit shipment forecast for Apple's third fiscal quarter to 7.83 million units, down from 8.35 million units — representing 27 percent yearly growth or an 8 percent decline quarter-to-quarter. "Due to declining average selling prices (ASPs) as a result of a full quarter of shuffle price reductions and the 1GB nano, combined with our lower 3Q unit forecast, we are now forecasting iPod revenue growth of 35 percent year-over-year to $1.5 billion (was $1.6 billion)," he wrote.

The analyst now expects iPod unit sales to total 39.8 million in fiscal 2006 (reflecting yearly growth of 77 percent), driven by solid demand for new iPods during Apple's fourth fiscal quarter and strong back to school sales. In 2007, Reitzes sees iPod growth slowing to 29 percent year-over-year to 51.4 million units.

UBS continues to expect new Intel Power Macs in August, new iPods next quarter and an iPhone somewhere down the line. The firm maintains a "Buy" rating on Apple shares with a price target of $90.