Apple Falls Further Ahead of a Nervous Third-Quarter Reporting Season

After a few weeks of earnings warnings, investors and analysts alike are beginning to grok that the slowing economy is stunting technologyis juggernaut growth. The Nasdaq declined and Appleis stock continues to churn lower on huge volume.

Wit SoundView analyst Gary Helmig summed up the grim mood on Wall Street, "Last month you couldnit afford to buy fuel to go out and get a PC. With all of these preannouncements, you have to wonder if there isnit a pattern in the worldwide economy that is going to bring slower technology growth."

With all the rank pessimism in the air you have to wonder if we arenit close to the bottom of this Octoberis sell-off. Although Lucentis after-the-bell warning today could cast a shadow over tomorrowis trading. Lucent (LU) said it would miss Wall Streetis already lowered 3rd quarter estimates of $0.27 per share by a full dime and lowered estimates for next year to boot. Lucent is trading down 7 3/4 to about 24 dollars in after hours trading.

Apple sank 7/8 to close at 20 7/8 on volume of 12 million shares. There are 78 buy orders on the Island ECN versus 384 sell orders in after hours trading, not exactly the sign of a solid bottom.

Yesterdayis news of Mitch Mandichis (Appleis Senior Vice President of Worldwide Sales) rapid and unexpected departure rocked the stock today. See last weekis Apple Trader column, "Apple Explained, In Steve We Trust" for a bit of insight into Mr. Mandichis fall from grace. Mr. Mandichis early retirement -- heis only 51 years old -- is seen by many AAPL investors as the swhooshing sound that comes just before the other shoe drops.

Appleis PE ratio is now a ridiculously low 10.7. The company has about $5 billion in cash with a market capitalization of less than $7 billion. That means the stock market is assigning a market value to the various divisions of Appleis business at less $2 billion.

Bear Stearns analyst Andrew Neff was quoted in a Reutersi article as claiming heis detected, "a dramatic change at the margin" in the PC sector. "It appears to us that the shortfalls were a genuine surprise to most companies, which -- as of mid-September -- expected to meet investor expectations, but something changed in late September resulting in significant shortfalls." He said Appleis warning "was truly a shock," and a probably not precipitated by issues wholly isolated to the Macintosh market.

The Nasdaq fell 115 points (-3.43%) to close at 3240 on volume of 1.8 billion shares. Semiconductors led the way up this summer , now theyire leading the way down this fall. The Philadelphia Semiconductor Index sank over 9% today.

The Dow fell 44 points (-0.42%) to close at 10524 on volume of a billion shares. Oil and energy stocks did well as crude oil price popped above $33 per barrel this morning. Exxon Mobil (XOM) made a new all-time high.

The S&P 500 dropped 15.01 points (-1.07%) to close at 1387.02.

In Apple related businesses: Akamai lost 2 3/16 to 41 3/4. Adobe fell 5 7/8 to 143 3/4. Earthlink fell 11/16 to 7 7/8, as rumors emerged suggesting Earthlink might buy out Napster.

Motorola shed 3/4 to 26 1/4. The G4 manufacturer will announce earnings after the bell. Motorola also said today that it is committed to boosting its G4 processor speeds to 1 GHz and beyond.

IBM shed 3 dollars to 114 15/16. The company announced plans to build a $2.5 billion semiconductor plant in East Fishkill, New York.

Appleis competitors: Dell scored another new 52-week low, down 1 3/8 to 24 1/4. Gateway was lower by 1.90 to 46.10. Compaq gave back 1.39 to 24.09. Shares of Microsoft gained 3/8 to 54 9/16. Intel fell 1 1/2 to 37 9/16.

Hewlett Packard lost 1 1/2 to 89 7/16, after announcing the ePC, yet another Wintel attempt to compete with the iMacis form factor. See "The iMac: A Case Study in Historical Contingency & Evolutionary Convergence" to see why HPis ePC is as likely to be successful as Dellis WebPC.

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Appleis stock activity, visit our Apple Stock Watch Special Report.

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