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Apple's Next Big Thing

In the first quarter last year, Apple earned $295 million, or 35 cents a share, on $3.49 billion in sales. For the full year, the company posted a year-ago profit of $1.34 billion, or $1.56 a share, on $13.93 billion in sales.

Despite the company's bullish forecast, investors were divided over the near-term outlook for its stock. With Apple expected to announce a new product -- possibly a video-playing iPod -- on Wednesday, one portfolio manager, who asked not to be named, plans to move from an underweight to a market weight position on Apple, saying they're "thrilled to get another opportunity to add."

"If I were a betting man, I'd bet that Steve Jobs pulls one out of the hat with [the upcoming] announcement," the portfolio manager said in an email. "Jobs can out-create any other tech person on the street. ... The nano or the product he introduces this week will be the gift to own this [Christmas]."

Other investors were more skeptical. Apple could be helped by Wednesday's product announcement, and strong nano demand should be a boon to the company, said a second portfolio manager, who wished to remain nameless. And sell-side analysts are likely to show strong support for Apple's stock in the days ahead, he said.

But the portfolio manager noted that in the days after their recent disappointing earnings reports, shares of Lexmark (LXM) and Dell (DELL) both continued to trade lower.

"If you went and bought Apple at $45, the downside might be $42 or $41," said the second portfolio manager, who plans to stay neutrally weighted on Apple shares.

In the quarter, Apple shipped 6.45 million iPods. In contrast, analysts were expecting the company to ship in the neighborhood of 7 million of the digital music players, and some whisper numbers were reaching as high as 9 million units.
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