While he does not expect Apple to announce a cell phone at its Showtime event this week, PiperJaffray analyst Gene Munster told clients on Monday that he continues to expect the company will ship an "iPhone" within the next 4 to 6 months.
"That said, we have not seen any concrete evidence that the product is near completion or launch," Munster wrote in a research note.
Still, the analyst notes that there have been several indicators that a cell phone project at Apple is underway, including the company's registration for the iPhone.org domain name and its "Mobile Me" trademark filing.
Munster, in his research note, also referred to recent comments from Japanese cell phone maker, Softbank, and Apple's own chief financial officer, Peter Oppenheimer.
"Also, given music enabled handsets are being introduced by potential handset maker competitors (ex: LG Chocolate), Apple will likely need to get in the game fairly soon to avoid missing the early adopters," he wrote.
Assuming Apple ships an iPhone early next year, at the Macworld 2007 trade show or a special event shortly thereafter, Munster expect the company will sell between 8 million and 12 million units in the full calendar year.
"We believe the most likely iPhone buyers would be those who have previously owned a higher average selling price hard disk drive iPod," he told clients. "We estimate that by the end of the December 2006 quarter, Apple will have shipped 34.5 million hard disk drive iPods at an average price of $323."
"Assuming 1.2 iPods per owner and assuming 33 percent of these higher average selling price iPod buyers buy an iPhone in 2007, we estimate approximately 10 million iPhones could be sold," the analyst added.
As part of his 2007 iPhone sensitivity, Munster is assuming an iPhone operating margin of 10 percent -- slightly less than the 12 to 15 percent achieved by major handset makers such as Nokia and Motorola.
"We are using a 10 percent operating margin in our sensitivity, which is more in line with the op margin of Palm," he wrote. "We believe Palm provides a better margin benchmark than Nokia and/or Motorola, given Palm is focused on high end devices and the devices are made with an ODM partner, which we would expect to be the case for the iPhone."
Apple currently has an overall company operating margin of 13 percent, so while the iPhone would add incremental revenue and earnings, it could have a slight negative margin impact, Munster said.
The analyst maintains an "Outperform" rating on shares of Apple with a price target of $99.
Last week, American Technology Research analyst Shaw Wu said his research indicated that an Apple-designed smart phone has moved from concept to prototype and recently has progressed to near completion as a production unit.
Wu later pointed to a recent Apple patent filing as proof that Apple holds ambitions to enter the cell phone market.