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BofA sees new iPod mid-year, iPhone by early 2007

Bank of America on Friday reduced its estimates slightly for Apple Computer's March quarter and next two fiscal years, pointing to unanswered questions about the company's potential to grow its share of the personal computer market and hints of weaker computer sales.

The firm reduced its projections for the recently concluded March quarter by 1 cent to 46 cents, or 2 cents above Street estimates. For fiscal year 2006, the firm lowered its estimates by 6 cents to $2.09, which compares to Street figures of $2.12. In fiscal year 2007, BofA estimates earnings of $2.40 a share, compared to the $2.60 estimated by the Street.

Still, the firm projects Apple will announce later this month that it sold 9.5 million iPods during its March quarter, which ran from January, while noting that "iPod growth remains healthy."

While the firm believes the outlook for iPods remains bright in 2006, it posed several questions on Apple's growth in the personal computer market.

"In the Dec 05 Q, Apple had gained 10 points of global share over the previous 4 quarters," analyst Keith Bachman wrote in a research note sent to clients before the weekend. "After the March 06 quarter, we believe that Apple will have gained no share or even lost share over the prior 4 quarters." He acknowledged that the company's Intel transitions was likely to blame.

"We believe that Apple is a superior product to the competition in CPUs/PCs, driven by the software," the analyst told clients. "However, we continue to believe that Apple CPU’s represent a premium priced product in slow growing geographies (US, Japan and Western Europe)." As a result, he suggested investors assume only modest share gains in Apple's CPU business.

"To be fair," Bachman said, "our planned estimate cuts of CPU unit growth lessened by the offering of Boot Camp." The analyst believes that Boot Camp offers a "safety blanket" for those "switchers" that want to a) retain access to some applications that are either not available on Macs, and/or b) still be able to access to old records such as financial management documents that may be Windows only. Additionally, he believes that Boot Camp may make it easier for users who want to tunnel in to a corporate VPN with Windows so they can access work applications from home.

While BofA remains concerned about the impact of a slowing growth on the multiple, it "likes Apple's product cycles" and predicts the company will debut new notebooks in the June (current) quarter, a new video iPod by next year and a phone in either the Dec. quarter or early January.

Bank of America maintains a "Neutral" rating on Apple shares with a price target of $77.