Analysts say iMac sales expected to cool this summer

Two Wall Street analysts today cut their fiscal third-quarter revenue estimates for Apple, but still believe the maker of the popular iMac will post earnings that meet estimates.

Steve Fortuna of Merrill Lynch trimmed his revenue estimate to $1.9 billion from $1.935 billion because he believes Apple will sell 445,000 iMacs, down from a previous forecast of 470,000.

"It is our belief that consumer-based iMac sales in the latter part of May have not showed the increase in momentum that we were expecting, especially in the U.S.," Fortuna wrote in his report.

Analyst Kevin McCarthy of Donaldson, Luftkin and Jenrette also cut his revenue estimates for Apple to $1.9 billion from $1.95 billion and his earnings forecast to 88 cents a share from 90 cents. McCarthy maintained his rating on the stock as a "top pick."

Apple representatives could not immediately be reached for comment.

Investors shrugged off the sales revisions, as Apple shares gained $5.13 to $89.13 at the close of regular trading. Earlier this week, analyst Donald M. Young of PaineWebber cut his 12-month price target on Apple shares to $100 from $130.

Although well below a 52-week high of $150.37 set on March 23, Apple shares have outperformed the market during the past year.

Apple stock has gained about 96 percent in 12 months, compared with a 46 percent rise in the Nasdaq composite index. The stock and the index are down about 14 percent since the beginning of this year.

Apple's price-to-earnings ratio of 29 is even with IBM and less than Gateway (34), Hewlett-Packard (43), Dell (60) and Compaq (89). A lower number means the shares are cheaper relative to per-share earnings.

In his report, Fortuna said Apple will meet analysts' consensus expectations of 88 cents a share for the quarter and did not adjust his fourth-quarter revenue and earnings forecasts.

Fortuna also raised his forecast of gross profit margins for the third quarter to 28.7 percent from 28.4 percent, citing "the current favorable?pricing climate" for dynamic random access memory (DRAM) chips.

"We think they will turn in a good quarter," said analyst Andrew Neff of Bear Sterns. "There's a concern that iMac sales will come in at less than expected, but the company is also making up for it in their high profit-margin items like PowerBooks."

Neff also said that while DRAM prices are currently lower than a year ago, predicting a trend in the notoriously volatile market remains tricky. "There are a lot of variables that are pulling (prices) in many different directions."

Fred Zieber, president of the research firm Pathfinder, also is unsure whether favorable DRAM pricing will help any one company. "All the computer manufacturers are in the same boat," he said. "If DRAM prices go up, then they all have to raise prices--and lower prices if DRAMs go down."

Zieber also thinks that shortages could be a problem for all PCs makers in the future. "There's more of a concern out there of not getting enough memory because of shortages," said Zieber.

While there is no evidence of a shortage, there also is not excess supply. "The DRAM market is just hanging in there," he said.

Last quarter, Apple earned $160 million, or 88 cents a share, excluding one-time gains. Revenue topped $1.9 billion, up 27 percent from $1.5 billion a year earlier.