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THE DAY AHEAD: Apple sees blue skies ahead -- if it can deliver

Apple Computer Inc. (Nasdaq: AAPL) will have a stellar December quarter as long as it delivers the goods. But there's a lot of demand ($700 million worth) to be met.

Apple faces a good news, bad news scenario if it's going to reclaim past glory in its fiscal first quarter. The good news: folks can't get enough of Apple's new products. The bad news: Apple had a lot of trouble getting them the goods in the September quarter. Apple beat reduced estimates Wednesday.

Can Apple catch up with its backlog?

Oh sure we can blame Motorola (NYSE: MOT) for the shortage of G4 chips, but that's old news. The supply and demand imbalance is still there and Apple has to dig itself out.

The end result? Apple has an order backlog of more than $700 million and channel inventory is dangerously low. Apple CFO Fred Anderson called the backlog "extremely large."

That statement is putting it mildly. Demand is only good if a company can meet it and Apple's September quarter suffered because it couldn't. Now there are orders for more than 250,000 new iMacs and 300,000 for iBooks since they made their debut in July. And there's a lot of catching up to meet demand for the new G4 Power Macs and PowerBooks.

Apple has showed us the razzle-dazzle, but now its blocking and tackling takes center stage. This quarter Apple won't get the headlines for its products, CEO Steve Jobs' speeches or trade show theatrics. This quarter is all about delivering the goods.

If Apple delivers, it will shut up a lot of critics, who incidentally have been hard to find in the last year or so. If Apple doesn't deliver the "same old Apple" chants will begin.

Anderson told analysts last night that the company can catch up on G4 Power Mac production because it lowered the speeds of the chips. The new Power Mac G4 configurations will now include Power PC G4 processors running at 350 MHz, 400 MHz and 450 MHz, and will be priced at $1,599, $2,499 and $3,499, respectively. Anderson said the new configurations can be produced in mass quantities to meet demand. The much-hyped 500 MHz version will ship in 2000.

The wild card? Motorola is still the sole supplier of G4 chips this quarter.

Apple's financial chief added that the quarter won't be completely backloaded for manufacturing the Power Macs. "We will ship a lot of units in October and a lot more in November," said Anderson. "It won't be perfectly linear, but it will be good."

PowerBook and iBook supply will still be constrained due to component shortages, but Anderson reckons that Apple will get caught up on iMac and Power Mac shipments.

And if Apple catches up it's going to be one whopper of a December quarter. Anderson sees revenue growth of 20 to 25 percent in the quarter --growth that would put it on par with expectations before its September profit warning.

IBM addition a great move

Apple also announced a bit of insurance to keep itself out of this kind of backlog jam in the future. IBM will begin manufacturing G4 chips in the first half of next year.

Anderson was short of details because he said the manufacturing agreement was between Motorola and IBM. Anderson also declined to comment on the split between the two suppliers.

And the details don't matter anyway. The bottom line is Apple will have two chip suppliers and that can only be good news for shareholders.