Expect some upside on Apple earnings today

Apple Computer reports earnings at the close of business today. Overall consensus analyst estimates are for the company to earn about $0.44 a share on revenue of $4.4 billion for its fiscal Q3. However, when we plug the numbers into our financial model, we see pretty different numbers. I come up with the same $4.4 billion, but I believe that Apple will earn about $422 million in profits, putting basic earnings at $0.50 a share, and diluted earnings at $0.48.

Why so optimistic? The numbers I have are driven not by iPod sales, but by Intel-based Macintosh sales, specifically MacBooks and MacBook Pros. Go to any software developer conference nowadays, and MacBooks and Powerbooks are rampant; some have even gone as far as to say that Apple laptops now are the platform of choice for developers. This will be the first full quarter of MacBook Pro sales, and the MacBooks were available for about half the quarter. I expect those sales to come in above most analyst expectations.

One other factor we shouldn't overlook is the power of Apple's retail channel now. Apple's showcase store on Fifth Avenue in the midst of names such as Tiffany's and Bergdorf's defines how the company has become a fashion icon as much as a technology company. The company invested in those stores when everyone said that it was the dumbest move in the world. Why? Because it allowed Apple to market itself in ways no partner ever could. Today earnings will allow Apple to demonstrate the hard business results shareholders get for those marketing investments.

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