Apple Announces Revenue and Earnings Warning
Apple opened significantly lower on Wednesday after issuing a revenue and earnings warning following the close of trading on Tuesday. For the quarter Apple expects revenues of $1.4 billion to $1.45 billion versus the previous estimate of $1.6 billion and earnings of $.08 to $.10 per share versus an earlier estimate of $.11.
On Wednesday Apple opened at about $17.30 per share, off $2.85 from Tuesdayis close, over fourteen percent lower in very active trading. AMD, the maker of Athlon series chips for Windows-based PCs and chief rival of Intel in the PC chip market also warned investors. According to a report filed on CBS MarketWatch, AMD expects a dramatic drop in sales from earlier estimates. AMD now expects revenues for the quarter to fall between $620 million and $700 million compared to prior expectations of revenue in the $800 million to $920 million range. This will significantly widen AMDis loss for the quarter and confirms reports of a global drop in PC sales. Most analysts and experts do not expect a turnaround in PC sales until the early part of 2003.
Adding to the woes of chip makers is a report that major manufacturers of DRAM chips are facing a Justice Department inquiry into allegations of market dumping of products.
In afternoon trading the markets struggled under the weight of the tech sector warnings. Warnings from Apple, AMD, Ciena and Adobeis warning last week The Dow Jones Industrial Average finished down 144.55 at 9,561.57. The S&P 500 was off 17.15 at 1,019.99. The NASDAQ Composite Index ended down 46.12 at 1,496.84 . The tech-heavy NASDAQ continues to sag as the markets brace for a rapid-fire series of warnings from tech sector companies.
On Wednesday Merrill Lynch downgraded Apple from Buy to Long-Term Neutral. Analyst comments on Appleis earnings warning kept Apple from moving up from its morning lows. Volume was an extraordinary high 30.16 million shares. Apple ended at $17.12, down $3.03 or fifteen percent from Tuesdayis close. Adobe Systems closed down $2.78 at $27.71 in sympathy with Apple.
All things considered, were it not for the introduction of the new iMac and Appleis successful strategy in education, Appleis revenues and earnings drop for the quarter might have been more dramatic. According to Apple executives, heavy demand for the new iMac obscured the slowing sales trend until the June period. Consumer demand for products failed to pickup during the graduation season and Fatheris Day periods. Appleis public comments on the revenue and earnings shortfall referenced the general slowdown in PC sales as the prime factor in the sluggish sales picture. However, some buyers may be delaying purchase decisions due to broad speculation that Apple will release a new G4 minitower at MACWORLD Expo next month.
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