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Apple set to report fruits of busy summer

With its quarterly earnings due Monday, the expectations are high for the maker of Macs and that fancy new gadget.

One of the most eventful fiscal years in Apple's history is coming to a close with the company's financials in unprecedented shape.

After the close of the stock market Monday, Apple is scheduled to report earnings for the fourth quarter of its 2007 fiscal year, which ended in September. With new Macintoshes, new iPods and the first full quarter of iPhone sales to add to the bottom line, the company shows no signs of falling off its .

As usual, expectations are high. It was quite a summer for Apple, with new products in its three major businesses and perhaps one of the most important product launches in the company's history. Wall Street analysts think Apple is poised to report revenue just over $6 billion and earnings per share of 85 cents. Apple is notorious for giving conservative guidance to analysts: in July it said it expects revenue of $5.7 billion and earnings per share of 65 cents, just minutes after it exceeded its own earnings per share estimate for the third quarter by more than 20 cents.

Someday, of course, Apple's magical run of the past few years might end--but not now.

Someday, of course, Apple's magical run of the past few years might end--but not now. The iPod's role in Apple's profits is already an old story, but the introduction of new units across the board in September might have given a slight boost to sales, although the majority of those new music players aren't expected to sell until the holiday season. This quarter, the focus is on Macs and the iPhone.

Mac shipments are surging. IDC reported Tuesday that Apple is the third leading PC company in the U.S., trailing Dell and Hewlett-Packard by a significant margin but leading Toshiba and Gateway. Rival researcher Gartner somehow counted several hundred thousand more Mac shipments in the quarter than IDC did, but anyway you slice it, Macs are selling.

Apple always tends to do well during the back-to-school shopping season, and this year it introduced shiny new iMacs right as students were gearing up for college. As with the rest of the industry, however, notebooks are driving most of the growth. Expect Apple to report having sold around 2 million Macs during the quarter, up from 1.8 million last quarter, according to financial analysts.

The company is also getting ready to introduce Mac OS X Leopard, the next version of its operating system, later this week. It doesn't appear many analysts and Apple followers are worried that Leopard's pending debut caused a slowdown in demand, but Leopard could provide a boost for Mac shipments around the holidays.

Investors will also be watching for iPhone shipment totals for the quarter. Over the weekend of September 9, Apple reported reaching its goal of shipping 1 million iPhones since the device was introduced on June 29. But how many did it sell after the infamous price cut?

When Apple dropped the price of the iPhone by $200, angering early adopters and forcing the company to hastily offer a $100 store credit in apology, one of the reasons given by the company was that it wanted to attract a broader group of customers. On the other hand, a cynic might say Apple had exhausted the pool of early adopters who would have paid anything to own one of the first iPhones, and were just settling in at the natural price for the iPhone.

All eyes on iPhone numbers
But either way, the iPhone is more attractive at $399 than it was at $599, and the shipment number will be one of the single most anticipated numbers in Apple's earnings release. Piper Jaffray thinks Apple will report having sold 1.05 million iPhones, while Bear Stearns has slightly more conservative expectations of 1.02 million units.

Apple may also provide some details on its revenue-sharing agreement with AT&T, said Gene Munster of Piper Jaffray. In a research note issued this week, he predicted the arrangement could add around $10 million in revenue, which isn't much in a pool of $6 billion but could shed some light on exactly how much revenue Apple is getting per handset. To date, the company has confirmed it is has a revenue-sharing agreement but hasn't publicly shared the exact details.

Another item worthy of attention will be the iTunes Store, which this summer has seen some increased competition--both from other stores like Amazon.com and from the producers of the content themselves. Revenue from the store doesn't contribute nearly as much to Apple's bottom line as the sale of its hardware, but it's still indicative of what people are doing with their iPods and the broader trends for online purchases of digital music and video.

Investors ran up Apple's stock in the week before the announcement, ending the week at $170.42, less than $4 off the company's 52-week high. Apple investors tend to stick with a buy-on-the-rumor, sell-on-the-news strategy, so don't be surprised to see Apple's stock fall next week if the company beats its own targets but misses one of Wall Street's targets for a certain segment.

Last quarter, Apple Chief Financial Officer Peter Oppenheimer warned the financial community not to expect a duplication of the company's second-quarter earnings per share figure of 92 cents a share. To introduce the new iPods, Apple had to clear inventory of older models, which tends to drag down gross margins to some degree.

Oppenheimer also warned of higher component costs and an "expensive" back-to-school promotion, which could have been the iPhone price cut but was more likely the free iPod that student buyers could receive along with the purchase of a new MacBook or MacBook Pro.

Still, Apple is likely to report another very solid quarter to close out its financial year. For the full year, Apple is expected to post revenue of $23.9 billion and earnings per share of $3.78, increases of 24 percent and 67 percent, respectively, and all-time highs.

For any company not named Google, that's an enviable financial picture.