Video: Apple works on v.2 iPhone before first is out

updated 11/22/2006 9:21:32 PM ET 2006-11-23T02:21:32

Shares of Apple Computer Inc. rose Tuesday, as investors speculated that the company may be close to launching a cell phone encompassing some of the features of its highly popular iPod digital music player.

On Monday, analysts said chip maker Broadcom Corp. was likely to supply chips for the cell phone that Apple could launch in early 2007.

Broadcom shares rose Monday on the Apple phone rumor, as well as several other factors, including an improving outlook for the general chip market and the successful weekend launch of Nintendo Co. Ltd’s Wii game console, which includes Broadcom chips.

UBS analyst Alex Gauna, who has a buy rating on Broadcom, cited the Apple speculation and expected improvements in general chip demand for the rising share price.

“The other thing that’s been increasing in terms of market awareness is speculation that Broadcom will be involved in the Apple iPhone expected early 2007,” said Gauna, referring to the nickname analysts adopted for the expected device.

Broadcom and Apple declined comment.

Apple, whose iPod leads the digital music player market, has never confirmed widely held expectations it would launch a music phone to compete with a growing selection of cell phones that already include digital music players.

Gauna estimated Apple could sell as many as 12 million music player iPhones in 2007, boosting branding and revenue for Broadcom, which already supplies chips for video iPods.

“It’s a meaningful design win,” he said without giving an estimate for how much it would help Broadcom revenue.

Another analyst, Adam Benjamin from Jefferies & Co. also believes an iPhone supply deal would boost Broadcom growth.

“There’s some very high expectations for what that iPhone could sell next year,” said Benjamin, who also has a “buy” rating for Broadcom.

Broadcom was also benefited from the debut on Sunday of the Wii, which attracted crowds of gamers outside stores to buy the gadget.

Analysts said it was well known Broadcom chips would be included in the Wii and some said investors may be reacting to the success of the launch.

American Technology Research analyst Albert Lin attributed the Broadcom share move to “all the excitement about the Nintendo Wii.”

Lin has a “sell” rating on Broadcom shares because he does not expect the rally to endure.

Broadcom shares are up 68 percent since late July in comparison with a 25 percent increase in the Philadelphia Stock Exchange index of semiconductor stocks.

UBS’s Gauna said Broadcom’s steeper move is attributable to the view it might be among the first chip makers to recover quickly from an industry downturn.

Copyright 2012 Thomson Reuters. Click for restrictions.

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