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Monday, January 08, 2007, 08:00 am PT (11:00 am ET)

Macworld: Apple expected to surprise at Macworld Expo

An unusual level of uncertainty over product announcements expected from Apple Computer on Tuesday will likely to allow chief executive Steve Jobs more room to surprise, one Wall Street analyst says.

"We believe this is likely because Apple is plugging leaks better as protecting its secrecy remains a top priority for the company," Shaw Wu, an analyst with American Technology Research, told his clients on Monday. "We therefore believe there will likely be more surprises this year."

Wu anticipates the Cupertino-based company will focus its announcements on two areas — Macs and home entertainment. He told clients that supply chain sources have indicated that both video iPods with Bluetooth stereo headphones and cell phones are "near/at" their respective manufacturing stages.

"The very successful vPod has not had a major update since August 2005 when it was first announced," he wrote. "Our analysis in the supply chain indicates that its successor has been under development for some time and recent data indicates shifting component order dynamics."

Still, Wu said he does "not have high conviction on timing" for the availability of the devices. Similarly, he is unsure of the company's go-to-market strategy and provider model for its cell phone initiative.

Meanwhile, the analyst said its likely Jobs will announce new movie content partnerships with one or more studios during Macworld Expo on Tuesday, adding that his checks also indicate internal development of large-screen technologies to complement iTV.

"We believe iTV will be the first of many products that will place Apple in the home entertainment business in more direct competition with leading consumer electronics companies like Sony and Samsung," he wrote. "In our view, iTV is a logical extension of its iPod + iTunes and Mac franchises giving Apple a sizable head start in home entertainment with its FrontRow software, large TV content and growing movie library."

On the Mac side of the equation, Wu believes the key feature Mac OS X 10.5 Leopard will have over its predecessors is much better Windows compatibility. Despite repetitive denials on the subject from Apple's leadership, the analyst said he is "picking up the potential for full-blown virtual machine capability that will allow seamless use of Mac and Windows at the same time."

Wu recommend clients buy Apple on dips in share price. "We continue to rate Apple shares Buy with a $99 price target," he wrote.