Apple Hanging on a 'Halo'

For Apple (AAPL Quote), the time may be ripe to get back to the Mac.

Over the last two years, the company's popular iPod music players have revived the company's financial results and stock price. But now, with iPod sales slowing, many investors awaiting Wednesday's third-quarter results are turning their attention back to core computer sales.

"I want to see what type of market share they're picking up," says one buy-side analyst who asked not to be identified and whose firm has no position in Apple's shares. "For me, that's the main issue."

Analysts have been predicting that the popularity of the iPod would have a "halo effect" for Apple, attracting new customers to Apple's Macintosh computers. And in recent months, the company's sales have outpaced the larger PC market. But some analysts have questioned the sustainability of the halo, especially as Apple moves into a transition period as it changes the chips at the heart of its computers.

For their part, sell-side analysts have high hopes both for Apple's just completed quarter and for coming periods.

Wall Street has predicted that Apple will post a profit of 31 cents a share on $3.34 billion in sales. That estimate is significantly above the company's own outlook; back in April, Apple officials forecast the company would earn 28 cents a share in the quarter on $3.25 billion in sales.

Either way, the result would be a significant improvement over the year-earlier period, when Apple earned $61 million, or about 8 cents a share, on $2.01 billion in sales.

Similarly, for next year, the sell-side consensus is for a profit of $1.54 a share on $16.31 billion in revenue, which would improve upon this year's predicted results of EPS of $1.33 on sales of $13.7 billion.

But Apple could run into headwinds in trying to meet those forecasts if iPod sales slow down, as many now seem to expect.