Market Waits Eagerly For Apple's Results

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Includes: AAPL, GOOG, MSFT, WDC
by: Shlomi Cohen

Of the companies due to report this week on Wall Street, most of the attention will center around Apple Inc. (NASDAQ:AAPL), which will be unveiling its results today after the bell. Although the June quarter contained barely a day and half of iPhone sales, the market is nevertheless waiting eagerly for more "color" from Apple's managers about the first month of the launch, and their expectations for the rest of the year.

In this context, SanDisk Corporation (SNDK) founder and CEO Dr. Eli Harari told Maria Bartiromo on CNBC television last Thursday that the iPhone effect was the factor that had stabilized the flash chip market, which was why he had raised his guidance and beat the market estimates for the second quarter.

Apple has added 70% since CEO Steve Jobs first unveiled the iPhone at the beginning of January, an addition of more than $50 billion in market cap, and a development that shows just how high the expectations are of the company as it prepares to unveil its quarterly results. I believe that after the disappointing results from Google Inc. (NASDAQ:GOOG), by Thursday morning we could find ourselves disappointed, albeit temporarily, by two companies, described by some as those which will lead forward the technological revolution in the next decade, in place of Microsoft Corp. (NASDAQ:MSFT), which has been the undisputed leader for the last two decades.

Some people will no doubt recall that when Google first floated three years ago in the summer of 2004 at $100 a share, its market cap combined with that of Apple, then traded at $15, was just a small fraction of that of Microsoft. Three years on, the combined market cap of both companies now stands at $287 billion, just a short distance from that of Microsoft, which currently stands at $298 billion.

The market expectations of Apple are for sales of $5.3 billion in the June quarter, with guidance for the September quarter, the last in its fiscal year, at slightly over $6 billion. Earnings per share for the June quarter are expected to come in at $0.72, with guidance for the September quarter at $0.83. For many years, Jobs has easily beaten the market estimates, but slightly disappointed in his guidance, since he prefers to give conservative estimates, which he can then beat with ease. Those who are apprehensive about Apple in the short term, note that computer sales could be disappointing due to a seasonal slowdown ahead of the launch of the new operating system in October.

There are also fears of weaker-than-expected sales in the media player sector for two reasons. One is the expectation of a raft of new launches, including media and music players with "very user-friendly" touch screens. Then there is the apprehension of iPhone users, principally those who took Jobs at his word and bought, or are going to buy, the iPhone instead the iPod, because it's "best media player in the world." These fears are likely to dissipate, if Jobs, for example, announces today that he expects the company's share of the global handsets market to reach 2% instead of 1%, meaning 20 million units.

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Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

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