Apple results eyed for iPhone sales

By Scott Hillis

SAN FRANCISCO (Reuters) - Apple Inc. (AAPL.O: Quote, Profile, Research, Stock Buzz) is expected to show a 35 percent surge in quarterly profit this week, but the focus will be on just two days: the last 48 hours of June when its highly anticipated iPhone went on sale.

The iPhone contributed virtually none of the $637 million Apple is forecast to have earned, but investors are eager for the first official word on how many of the combination phone, Web browser, media player devices were sold at launch.

"Perhaps the most significant catalyst from the report will be feedback regarding initial iPhone demand," Deutsche Bank analyst Chris Whitmore said in a research note. "We believe initial iPhone demand is very robust."

Wall Street reckons Apple sold up to 700,000 iPhones in the first weekend, but the company is booking sales from the $500 and $600 handsets as subscription revenue over two years, so only one-eighth of that will show up in the income statement when it is released on Wednesday.

Optimism over the iPhone's prospects have helped push up Apple shares nearly 50 percent, to $143.75, since Chief Executive Steve Jobs unveiled the product in early January.

But analysts say that until iPhone shipments reach tens of millions of units a year, Apple's underlying financial performance will still be driven largely by its Macintosh computers and iPod music players.

For Apple's third fiscal quarter, analysts are looking for unit shipments of Mac computers to rise more than 25 percent from a year earlier, led by new laptops with upgraded parts.

The Mac growth rate is more than double that of the overall PC market, thanks partly to iPod buyers switching to Mac computers, and recent industry figures show Apple gaining share against PCs running Microsoft Corp.'s (MSFT.O: Quote, Profile, Research, Stock Buzz) Windows operating system software.