Apple Still Rolling Along - TheStreet

There are two schools of thought when it comes to

Apple Computer

(AAPL) - Get Report

.

One is that the company is gradually becoming a viable force on the PC landscape again, and the new

iMac

line is just the first in a series of bold moves from Apple's interim CEO Steve Jobs.

The other view is that no matter how much marketing noise the company makes, it will never gain enough leverage to significantly alter the

Microsoft

(MSFT) - Get Report

-

Intel

(INTC) - Get Report

duopoly.

Investors are clearly favoring the more optimistic scenario, pushing the stock up more than 150% over the past year. Last week's

Macworld Expo

, where a host of colorful new iMacs were introduced, was a certifiable

love-in.

And why not?

The company is expected to blow out analyst earnings estimates when it reports fiscal first-quarter earnings Wednesday after the close. The consensus for the company -- which earned 33 cents a share in its year-ago quarter -- is 69 cents a share, according to

First Call

, although it's widely expected that Jobs & Co. will make a mockery of that number.

Analysts now expect Apple to report its first year-over-year revenue

increase

in 12 quarters. Four years ago, the company made $11.1 billion in revenue, but it could manage only $5.9 billion in its most recent fiscal year ending in September. But now the Cupertino, Calif.-based company is in line to generate $1.7 billion in revenue for the quarter, better than $1.58 billion it made in the year-ago quarter and $1.56 billion in its fiscal fourth quarter.

By consolidating product lines, lowering inventory levels even below

Dell's

(DELL) - Get Report

and beefing up its advertising and marketing campaign, Apple has turned a number of analysts into true believers. "If you take your techie hat off for a minute, Jobs has been doing some very smart consumer marketing of late," says

Gerard Klauer Mattison

PC analyst Lou Mazzucchelli, who rates Apple a buy and sees the company earning 78 cents a share. (His firm has done no recent underwriting for Apple.)

Not to be left behind,

Credit Suisse First Boston's

Michael Kwatinetz upgraded his rating on the stock to a buy last week. Reason: Based on price-to-earnings ratio and price-to-revenue ratio, Apple is undervalued compared with its competitors. (CS First Boston has done no recent underwriting for Apple.)

Mazzucchelli, who just helped his father buy an iMac at his local

CompUSA

(CPU)

, says the new color scheme is great because it appeals to kids. "I know my son isn't going to want a teal one now," he says. Apple announced that it sold 522,000 iMacs in its December quarter.

In fact, Apple managed to grab 6% of all PCs sold in the U.S. retail market in December, according to preliminary figures from

ZDNet's

StoreBoard survey. At its low point in 1997, Apple controlled just under 3% of the total PC market worldwide, but that figure has now climbed above 4%, estimates Dave Tremblay, senior industry analyst at market researchers

ZD Market Intelligence

.

But Tremblay, a former Apple executive, thinks his previous employer needs more fanciful colors to push its brand further. "There's no doubt Apple will remain a viable PC maker in the intermediate term because sales have been very solid," says Tremblay. "But Apple continues to look for a silver bullet to slay the

Wintel

demon, and I don't just see that happening."

The odds are daunting. The Wintel (Windows operating system and Intel chips) duopoly controls approximately 96% of the worldwide PC market. "It's the old quandary with Apple all over again," says Patrick Manning, a money manager at

Perry Capital

. "The iMac is a good machine, but Apple doesn't have the leverage to play catch-up with all the sub-$1,000 machines out there."

Manning, whose firm recently sold its position in Apple, believes the company's rapid top-line growth is being driven by a series of one-time factors, such as iMac and its MacOS 8.5 upgrade. While the stock is still relatively cheap in terms of valuation -- at 45, it trades at 19 times 1999 earnings -- Manning says he is "loath to make that bet on Apple again." Adds ZD Market's Tremblay: "It's hard for me to see them ever even getting a 10% share."

This is exactly the challenge that motivates Jobs. After the iMac, Jobs will need another hot product to complement the first substantive upgrade of its operating system, MacOS X, which is expected by the fall. Expect a new portable-type device -- a portable iMac, perhaps -- later this year that is getting some early buzz on many Mac-centric Web sites.

Just 18 months ago, Apple's future existence was in doubt. Now, another healthy quarter should prove to Wall Street that Jobs has to be taken seriously. For Apple's investors, the surging stock price is proof enough.