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Monday, September 11, 2006, 10:00 am PT (01:00 pm ET)

Apple upgraded by Credit Suisse on stellar MacBook sales

Following a recent trip to Asia, analysts at Credit Suisse equity research are raising estimates for Apple Computer based on stronger than expected sales of its 13-inch MacBook consumer notebooks.

In a research note released to clients on Monday, analyst Robert Semple said his channel checks indicate overall MacBook shipments are tracking at approximately 200,000 units ahead of his initial estimate of 580,000 for the company's fourth fiscal quarter of 2006, which ends later this month.

"Specifically, we estimate total shipments will reach at least 775,000 with a blended average selling price of of $1,100, driving upside of $215 million to our original $4.6 billion revenue estimate," he wrote. "We are also raising our fiscal year 2006 revenue estimate to $22.65 billion from $22.03 billion."

Semple said the MacBook is resonating well at both educational institutions and with students shopping for the back-to-school season. He believes the product’s $1,099 price point addresses approximately 50 percent of the notebook market, which compares favorably to the iMac, which addresses 12 percent of the desktop market following last week's price cut to $999. "Please note the iMac comparison is unfair as it includes a panel, whereas other desktop vendors sell panels separately," he added.

The analyst estimates Apple's gross margin on MacBook sales is consistent with the corporate average. However, he believes the company derives significant operating leverage when it sells more units than planned because the incremental operating expense associated with manufacturing additional MacBooks is marginal.

As a result of his checks in the Far East, Semple raised his fourth quarter earnings-per-share (EPS) estimate to 52 cents from 49 cents. He also increased his fiscal 2007 EPS estimate to $2.64 from $2.44, "underscoring the inherent operating leverage in the Mac business."

Looking near term, the analyst said Apple is poised for a busy week with its "Showtime" event on Tuesday likely to bear a new iPod nano along with a new video based iPod designed for feature length films. "At this stage, we are leaving our fourth quarter iPod estimate of 9 million (+40 percent year-over-year) unchanged until we receive more clarity into the new products," he wrote.

Semple reiterated an "Outperform" rating on Apple shares with a 12-month price target of $90.