Apples for the students seen lifting Mac sales

Apple's fourth-quarter earnings report is expected to show a slight decline in the growth of the iPod phenomenon, but higher Mac sales.

Apple Computer will look to complete one of its most successful fiscal years ever with a bang when it reports its fourth-quarter earnings later Wednesday.

A full quarter of MacBook shipments as well as a solid back-to-school shopping season has set the stage for the earnings report, which will be released after the stock market closes. Overall, analysts surveyed by Thomson First Call are projecting Apple to report $4.7 billion in revenue, which would be a 27 percent improvement over last year's fourth-quarter revenue of $3.68 billion--at the time a company record .

Financial analysts expect Apple to report higher-than-expected Mac sales, especially in the notebook category. After its May introduction, the MacBook was available for an entire quarter this time around. This also happened to coincide with the back-to-school shopping season, and student purchases were expected to drive MacBook sales to new heights, said Richard Farmer of Merrill Lynch. Farmer raised his expectations for Apple's Mac shipments to around 1.51 million units, which would be a 22 percent increase compared with last year, he said in a research note distributed last week.

Another new system available during the quarter was the Mac Pro, which completed Apple's transition to Intel's processors. This particular system is designed mostly for Apple's professional customers, but like the MacBook in the last quarter, was probably introduced too late in the quarter to have a pronounced impact on quarterly sales.

One prominent Apple supplier thinks the Mac maker enjoyed a decent quarter. "I think you'll be happy there," said Paul Otellini, president and CEO of Intel, in response to a question about Apple's fortunes during his own earnings conference call Tuesday. "So far they've done very well with the transition" away from PowerPC chips to Intel's processors, he said.

But Apple still sells a lot of those iPods. Analysts and iPod fans finally got the new iPod Nanos they were clamoring for in September, but those units were likewise unlikely to have much of an impact on a quarter that ended a few weeks after Apple's "Showtime" event. Gene Munster of Piper Jaffray thinks Apple shipped 8.2 million iPods during the quarter.

That's less than the consensus of Wall Street analysts, but still a pretty healthy growth rate compared with last year. Farmer is more pessimistic, expecting quarterly iPod sales of 7.7 million units, which is still a 20 percent increase over the same period in 2005.

Apple executives will likely focus on the bread-and-butter numbers during their conference call Wednesday afternoon. But some analysts are likely to make inquiries about the stock-options backdating scandal that cost the CEOs of McAfee and CNET Networks, publisher of CNET News.com, their jobs last week. Apple has admitted that CEO Steve Jobs was aware that favorable exercise dates were granted for some stock options, although it has said that Jobs didn't know the implications of the practice and did not profit from the backdating.

Still, board member and former Chief Financial Officer Fred Anderson resigned from the board of directors two weeks ago in connection with Apple's investigation into stock-options backdating. Jobs is not expected to step down as Apple's CEO, but financial analysts are sure to ask if there will be any remaining fallout from Apple's investigation. Eventually, Apple expects to restate its financial reports for certain operating periods affected by the backdating.

Apple was also part of the massive recall of Sony's lithium-ion batteries in August. But since Sony is picking up much of the price tag for the replacement of those batteries, Apple has said it doesn't expect the recall to have a material impact on its finances.

Looking forward to the holiday shopping season, Apple will probably provide conservative guidance about its fortunes, Munster wrote. Last year, Apple increased its revenue by 56 percent from its fourth fiscal quarter to its first fiscal quarter, but analysts at the moment expect Apple to increase revenue by 39 percent from the fourth quarter to the first.

The ever-present Apple rumor mills have been relatively quiet since the new iPod Nanos were introduced in September. The latest gadget being debated on enthusiast sites is the iPhone, which even financial analysts believe is real and around the corner. It's possible that Apple executives may drop some subtle hints about future product directions, but the company is usually very tight-lipped when it comes to its product plans.

About the author

    Tom Krazit writes about the ever-expanding world of Google, as the most prominent company on the Internet defends its search juggernaut while expanding into nearly anything it thinks possible. He has previously written about Apple, the traditional PC industry, and chip companies. E-mail Tom.

     

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