Analyst: Apple to concede Mac sales shrinkage Wednesday

But the worst is over, says Wall Street analyst, who points toward China, new iPhone and Snow Leopard

Apple Inc. Wednesday will report that it's sold fewer Macs in the first quarter of 2009 than the same period the year before, the first time in nearly six years that the company will have acknowledged a sales slide, a Wall Street analyst predicted Tuesday.

Brian Marshall, an analyst with Broadpoint AmTech, estimates that Apple will report a 5% drop in Mac sales during the year's first three months compared to the same quarter in 2008 when it releases earnings figures Wednesday afternoon.

Other analysts' estimates have pegged Mac sales in the same area, ranging from 2.1 million to 2.2 million machines. In 2008's first quarter, Apple sold nearly 2.3 million Mac laptops and desktops.

The last time that Apple reported a year-over-year sales dip was in July 2003, when it said it had sold 771,000 Macs in the year's second quarter, down 5% from the year before.

Quarter-to-quarter, Apple will likely report a slide of about 10% in sales, Marshall said. "My assumption is that international sales will be essentially flat, but that U.S. sales will be down about 10%," he said. Apple traditionally posts poor numbers in the first calendar quarter, which comes after the holiday selling season of the year before. In early 2008, for example, Mac sales were off about 1% from 2007's last quarter.

iPhone and iPod sales will also be sharply down this quarter compared to the previous one, Marshall said. According to his estimates, Apple sold about 3.1 million iPhones in 2009's first quarter, down 28% from 2008's fourth quarter, and sold 50% fewer iPods quarter-to-quarter.

The recession has clearly caught up with Apple. Even if Apple reports revenues of US$8.3 billion -- Marshall's projection, which he acknowledged was higher than the consensus on Wall Street -- it would be down 19% from the $10.2 billion record Apple earned last quarter.

The downturn in Mac sales won't stop anytime soon: Marshall projects that Apple will see a 12% decline in computer sales in the quarter ending June 30.

But he was optimistic that the worst was already behind Apple, if not the Mac. "There's a lot of possibility to drive the shares higher," he said, ticking off the things he's factored into his future projections.

"The first significant event will be [Apple] announcing the iPhone for China," Marshall said. "That may take place as early as May 17, when China Unicom will turn on its 3G network." In March, Web sites and bloggers reported that China Unicom, which boasts more than 150 million subscribers, had confirmed that it would start selling the iPhone next month.

"The next is June 8, the first day of WWDC (the Worldwide Developers Conference), when Apple will launch their new iPhone," Marshall added. He expects Apple to sell a 32GB iPhone at $299, a 16GB model for $199 and possibly an 8GB device for $99.

And unlike last year, when Apple delayed shipping the new iPhone 3G until July, this year the company will start selling its next-generation smartphone in June, the same month they unveil it. "I don't think they'll make that mistake again," he said, citing the bump in second-quarter revenues Apple got in 2007 when it launched the original iPhone in June rather than July.

Snow Leopard, as the next Mac OS X operating system has been dubbed, will also add some black to the bottom line later this year, Marshall said. "Snow Leopard will positively affect their bottom line. A couple of million units, and that's nearly all profit."

Marshall has a "buy" recommendation for Apple's stock and has bumped up his target price to $135 a share.

"The key to Apple's model is the resiliency of its gross margins," he said. "And the increasing richness of the revenue mix as the iPhone [sales] grow will drive gross margins higher."

Apple will issue its quarterly earnings Wednesday at 2 p.m. Pacific (5 p.m. Eastern) during a conference call with analysts and reporters.

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