iPhone Shipments May Exceed Expectations, New iPods And Notebooks To Follow

| About: Apple Inc. (AAPL)

While extremely high expectations and excitement have moderated since the iPhone launched in late June, UBS expects shipments of Apple Inc.’s (NASDAQ:AAPL) smart phone will be higher than originally expected.

Analyst Ben Reitzes had previously forecast 800,000 units would be shipped in the fourth quarter of fiscal 2007, but now sees modest upside to that figure given signs showing solid demand for the iPhone is continuing.

The limiting factors we find continue to be the phone’s high price point and AT&T (NYSE:T) service, which doesn’t function as reliably in some key cities like New York and Boston (vs. West Coast cities, where reliability is better), he told clients in a note.

Mr. Reitzes expects Apple will add new models and features to the iPhone over time, while also penetrating the corporate market (dominated by Research In Motion) over time – a bonus given the vast opportunity in the consumer segment. Apple has also reportedly signed on three European mobile phone operators to sell the iPhone.

The analyst also sees strong demand for Mac notebooks and the recently released new iMacs. He thinks Apple will release new notebooks later this year, while the new Leopard operating system could provide a boost to sales of all the company’s computers.

Lets not forget about the ever-popular iPod music player. Mr. Reitzes expects new iPods will ship in September, including a larger upgraded video iPod. “We believe this multi-touch enabled iPod could see unit sales that are much higher than that of the iPhone—with a much bigger impact on earnings,” he said.

Mr. Reitzes rates Apple shares a “buy” with a US$175 price target, which represents an upside of more than 35%.

“We believe iPods multiplied Apple’s revenue streams into accessories and catalyzed Macs, while boosting Apple’s retail store revenue,” he said. “We believe the iPhone could have a similar effect, driving sales of accessories, bolstering retail traffic, and helping drive more sales of both iPods and Macs.”

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