Apple’s iPhone Should Power Mac Sales

07/09/2007 12:00 am EST

Focus:

Tobin Smith

Founder and Chief Research Analyst, NBT Equity Group

Tobin Smith, editor of ChangeWave Investing, says the iPhone and a new operating system could generate a surge in sales of Apple’s notebooks, and desktops, boosting the stock price.

I'm waiting to buy the iPhone, even though you should not wait for the 50% to 150% profits we're looking at in this Apple (NASDAQ: AAPL) revolution.

Despite the hype, I'm not buying an iPhone until we get the second iteration that allows you to use AT&T's 3G data network. Plus, I want to be able to get all of my e-mail, because the details have not been cleared up for business users who are accustomed to devices like the BlackBerry for mobile mail access.

So, mostly civilians will be the first buyers—the road warriors like myself are waiting for the next version.
But that's not the whole story here.

Now that the new iPhone franchise looks like a $40-per-share addition, it's going to be a $10 billion business.

The real shocker will be the huge amount of market share that Macintosh computers are ready to take, starting in October when Apple's new Leopard operating system comes out.

That's one reason I'm raising our 12- to 18-month price target [on Apple] to $200. (It closed Friday above $132—Editor.)

I am now forecasting up to $50 a share from Mac computer sales. Most people don't realize the additional revenue and earnings power for the Apple franchise worldwide that will come from Mac desktop and laptop sales.

The results from the more than 3,800 people who participated in the latest ChangeWave Alliance consumer PC survey showed a shift in sales for Apple's machines in both the desktop and laptop segments.

An astonishing 28% of all responders who plan to purchase a laptop in the next 90 days said they'd be buying a Mac. That's a huge increase over the March survey. Another 22% said they'd buy a [Mac] desktop, which is really even more surprising because I think of the laptop as the sexiest machine going.

This means that we see the Macintosh going from basically a 2% market share to about 5%. By the end of 2009 you can see a 10% market share for Apple Macintosh computers in the laptop and probably 7% for the desktop.

[Every] 1% gain in market share is worth another $2 billion in sales to Apple. And we're seeing the company's laptop sales increase by 33%.

The Apple Leopard operating system is going to blow you away. In addition to the easy Vista dual-boot integration, it's going to plug into the iPhone. This is a magic event in consumer technology.

The iPhone is looking like the greatest product since the iPod.

But it's the huge market share grab for the Macintosh that will add billions and billions of new dollars to Apple. Remember, once Apple broadens its reach from your phone to your PC, then it's going to go to your television. (The Apple TV device is just the beginning.)

So, if you're waiting for your iPhone, that's cool, but don't miss the Macintosh move.

The Apple wave, baby—it’s the real deal.

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