Analysts Frown On Impact From iMac Price Bump

by , 10:45 AM EST, March 22nd, 2002

CNNMoney reports that analysts are unhappy after Apple's announced iMac price hike strategy. Apple's stock took a hit yesterday as a reaction to the iMac price increase, the article, titled iMac price hikes bruise Apple, says. Analysts seem to buy Apple's explaination for the increase, but lowered their profit expectations due to the implications of those reasons. From the article:

"While it is a good thing that Apple is taking steps to protect its margins, we believe that Apple did this very reluctantly, as rising prices are a rarity in the PC industry," J.P. Morgan's Daniel Kunstler told his clients Thursday.

Kunstler trimmed his second-quarter earnings estimate for Apple to 6 cents per share from 11 cents per share, saying he believes "profitability on the new machines may have come close to evaporating in the quarter."

S.G. Cowen's Richard Chu also weighed in Thursday, telling his clients that although some of the impact of the higher component costs may be offset by tighter expense controls at Apple, he "wouldn't rule out" a possible 2-3 cents per share shortfall from his most recent estimate of 10 cents per share for the quarter.

By First Call's count, most analysts generally are expecting Apple to log a second quarter profit of 11 cents per share on roughly $1.4 billion in revenue.

You can read more in the full article.

The Mac Observer Spin:

There are going to be all kinds of negative and misinformed reactions to the comments from Mr. Kuntsler, so we thought we might offer our own guide on what was meant. Mr. Kuntsler says that Apple was reluctant to make the price hike, and probably did so at the last possible moment. The ramification of this is that each machine sold as you get closer to that moment (every machine sold so far) cost Apple more and more. That means that the profit margins on those machines gets lower the closer you get to the price hike, which is almost at the end of the quarter. Therefore, according to Mr. Kuntzler, Apple's profit margins are taking a hit right here, right now, in the company's second quarter. That's a sound and astute analysis, but it should not be confused with a condemnation of the price hike itself. Got it? Good.

iMac price hikes bruise Apple