Piper: Apple's Mac Business Growing As Expected; Leopard To Land Mid-April

Piper Jaffray comments on Apple (NASDAQ:AAPL) after speaking with 20 Apple specialist resellers over the past several days.

Firm believes that, on average, Street models assume around 1.45m Mac units for the Mar-07 quarter, which is down 10% q/q from Dec-06. In their checks with 20 Apple retail stores, 85% of resellers expect Mac sales in Mar-07 will decline slightly vs. Dec-06, while the other 15% expect Mac units will be flat q/q. In general, resellers defined "slightly decline" as a 5%-10% drop from Dec-06 to Mar-07. They believe, therefore, Street estimates are achievable and may be slightly conservative.

They believe Apple's new OS, Leopard, will likely be released in mid April. Slightly more than half of the resellers in checks said Leopard related purchase delays are having a slight negative impact on Macs, while slightly less than half said Leopard is not having any impact on Macs.

As was the case in the early days of the iPod, Apple resellers in firm's checks expect AppleTV will need to be more fully understood by consumers before it turns into a major contributor. Almost all (95%) resellers in the sample said they expect AppleTV will have a minor impact on business in the near term (next 1-2 qrtrs). Maintains Outperform and $124 tgt.

Notablecalls: So it looks like the Mac business is growing as expected. That's surely good news. Can the same be said for iPods? I'm not so sure.

Overall, AAPL continues to represent the only growing part of the PC business. That's enough to sustain the valuation for now. I don't expect the call to have a major positive impact on the stock today. We may see some buy interest, though.

Comments

[Tom B:]

"1.45m Mac units for the Mar-07 quarter" would be worrisome to me. I am puzzled we haven't seen an acceleration of the halo effect, given the large number of anecdotal examples I am hearing. Perhaps sales through Apple.com and Apple retail stores will be more impressive.

2007 Mar 20 09:32 AM

[Malkiel:]

This report described sales declines and then concluded "Mac business is growing as expected"--hardly the conclusion I would draw based upon the data!

We would expect some decline from Christmas period sales in the first quarter, and expect some consumer delay based upon waiting for Leopard, so the only factor left which could influence data positively would be increased sales over the same period in 06 from Microsoft's Vista meltdown. That's really the key catalyst here--how badly will Microsoft bleed pc market share to Apple, and how fast? Are you guys even tracking that? It's the story that matters the most here and I don't detect any awareness of it...

2007 Mar 20 09:59 AM

[Tom B:]

Yea- I expected comparison to the same quarter of '06.

For my part, I would not personally wait too long for 10.5. Unless it has a new touch-screen UI as some rumors sites have suggested (and I am VERY skeptical), there's nothing super-compelling over 10.4 for most users.

2007 Mar 20 10:26 AM