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Thursday, July 26, 2007, 08:40 am PT (11:40 am ET)

Goldman: Apple prepping redesigned iMacs, full-screen iPods

Apple Inc. is gearing up for several major product releases during the current quarter that should help drive earnings and higher share prices, including an overhaul to iMac and new full-screen iPods, according to investment bank Goldman Sachs.

"iPhone hype notwithstanding, with the heart of Apple’s product cycle about to begin, we want to stay with the stock," analyst David Bailey told clients in a research note Thursday. "In the September quarter, Apple will finish up a refresh of its entire Mac line-up, rounding it out with a redesigned iMac."

The analyst, who did not cite sources, said he also expects the company to launch a new family of iPods around the same time, which will pack significantly greater functionality at current price points,
"including the much-anticipated full screen video iPod."

Following Apple's earnings announcement and disclosure of initial iPhone sales figures on Wednesday, Bailey reduced his iPhone shipment forecast for the 2008 calendar year by 1 million units to 11 million units. However, he said Mac and iPod cycles still appear strong enough to generate higher volumes on their own.

"Stronger-than-expected retail traffic, a virtually complete revitalization in education, and the impact of Adobe’s CS3 in the commercial space should continue to drive better Mac sales and higher market share," the analyst wrote. "On the iPod side, we’ve changed our view about the level of cannibalization from iPhone based on early indications, particularly from the supply chain, about the coming video iPod which should be capable of driving an accelerated upgrade cycle."

Bailey also used Thursday's research note to increase his 2007 and 2008 calendar year per-share earnings estimates on the Mac maker to $3.71 and $4.30 from $3.58 and $4.30, respectively. However, the analyst said he found Apple's after-hours stock jump on Wednesday to be "somewhat perplexing" and would not be surprised to see the shares back off in the near term.

"That said, we do not expect our current earnings increase to be the last one, with even our current numbers yielding a new 12-month target price of $165 rolling the current multiple over to 2008 earnings," he wrote.

Bailey maintained his Buy rating on shares of Apple.