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Thursday, April 12, 2007, 08:45 am PT (11:45 am ET)

Apple's Mac sales see slight pause ahead of Leopard

When Apple reports its fiscal second quarter results later this month, unit sales of its Mac computer line should come in towards the lower-end of expectations as some consumers have begun to put their purchases on hold ahead of the launch of Leopard, one Wall Street analyst says.

In a note to clients on Thursday, American Technology Research analyst Shaw Wu said the buying pause will likely result in sales of between 1.37 million and 1.5 million Macs, significantly less than the 1.6 million units sold during the company's fiscal first quarter ended December.

"As a result, we are reducing our near-term Mac unit assumptions but raising estimates overall due to more favorable component pricing, better iPod sales, and resumed growth in Macs," the analyst wrote.

For the March quarter, Wu is now modeling Apple to report per-share earnings of 63 cents on sales of $5.12 billion, helped by sales of 1.4 million Macs and 10.3 million iPods. He had previously forecasted the Cupertino-based company to earn 60 cents on sales of $5.05 billion, based on sales of 1.43 million Macs and 9.2 million iPods. (Meanwhile, consensus estimates are at 63 cents and $5.2 billion, well above Apple's official guidance 54 cents to 56 cents and of $4.8-4.9 billion.)

The analyst told clients that iPod sales appeared to have fared more favorably during the second fiscal quarter than once thought, primarily due to better than expected sales of the new low-cost colored iPod shuffles. Meanwhile, he expects Mac sales will resume accelerated growth following the launch of Mac OS X "Leopard" at Apple's World Wide Developers Conference on June 11th.

For the current June quarter, Wu sees Apple offering its customary conservative guidance to reign in "sometimes unrealistic expectations." He's currently modeling for sales of $5.3 billion and per-share earnings of 64 cents, compared to consensus estimates of $5.5 billion and $0.68.

"While we believe Apple shares could be volatile as sell-side estimates get reset, we believe buy-side investors have more or less figured over the past year that sell-side estimates on Apple tend to be overzealous and sometimes outright irrational (particularly near-term)," the analyst told clients. "Regardless, we advise investors to take advantage should Apple shares pull back on short-term
concerns."

Wu reiterated his buy rating on shares of the consumer electronics maker, raising his 12-month price target slightly from $115 to $118.

"We continue to view Apple as among the strongest fundamental stories with its four-prong vertically integrated strategy (Mac, iPod + iTunes, Apple TV, and iPhone) and see several catalysts in the quarters ahead, including Mac OS X Leopard, new Macs, new iPods, new movie and carrier partners, and lower cost cell phones," he wrote.