AmTech maintains view on new nano, quarter

In a brief research note, analyst Shaw Wu said the highlights of Wednesday's Apple earnings report are that the company's Mac business is re-acceleration and despite fears to the contrary, iPod demand is relatively healthy.

"We continue to believe that new iPod nano refreshes will most likely occur in the late-September/October timeframe," the analyst told clients.

In dissecting Apple's upbeat earnings report, Wu said "bulls" are likely to point at Apple's favorable gross margin of 30.3 percent or that fact that the company's net cash grew almost $1B since the previous quarter.

The analyst, who estimates Apple's iPod installed base is now at 58 million, said the bulls are just as likely to point towards Apple's respectable iPod and Mac unit shipments, its 13 percent operating margin or its stellar inventory management.

On the flip side, Wu said the "bears" are likely to point out Apple's weakness in Japan, where revenues declined 16.5 percent sequentially to $258M.

Bears, he said, may also signal towards the declining average selling price (ASP) of iPods (by 8 percent to $185), flat iTunes music store profits, and an increase in DSOs (Days Sales Outstanding) to 24 days, which typically indicates a back-end loaded quarter.

"For the September quarter, Apple guided to $4.5 - $4.6 billion and $0.46 - $0.48 (vs. consensus of $4.94 billion and $0.52), in another attempt to reign in unreasonable expectations," Wu wrote. "We are leaving our forward estimates essentially unchanged for fiscal year 2006 at $19 billion in revenue and $2.14 in EPS (from $19.1 billion and $2.02 ) and for fiscal year 2007, $22 billion and $2.45 (from$22.1 billion and $2.45)."

"Our hope is that our sell-side peers follow Apple's revenue guidance more carefully and make more reasonable forward assumptions," the analyst added.

Wu maintains a Buy rating on shares of Apple with a price target of $75.