The market flew south in early trading on news that the Conference Boardis Index of Leading Economic Indicators dropped more sharply in August than anticipated. The Index is a complex model of measured business activity that is intended to prognosticate economic results in the three to six months that follow.
Stock prices were further pressured by a slew of corporate downgrades by analysts. The technology sector bore the brunt of the downgrade activity, pushing the tech-heavy NASDAQ Composite Index to a new six-year low. The S&P 500 Index fell below its multi-year closing low in intra-day activity.
The market has now discounted any hope of corporate revenues and earnings moving substantially higher during the remainder of 2002. The end of the third calendar quarter is literally one week away and traders are bracing themselves for mediocre quarterly results and somber corporate earnings guidance for the fourth calendar quarter.
On Monday the Dow Jones Industrial Average ended at 7,872.15, down 113.87. The S&P 500 Index was off 11.69 at 833.70. The NASDAQ Composite Index shed almost three percent, falling 36.16 to finish at 1,184.93. On Monday Apple lost US$.02 to close at US$14.85.
On September 10, 2002, the Board of Directors of Akamai approved a shareholder rights plan that provides shareholders with the right to purchase a special issue of preferred stock, convertible to common stock in such a way that it would exponentially increase the cost of an unsolicited takeover offer not approved by the companyis Board. The shareholder rights plan became effective today.
Akamai develops and maintains a network of Internet-based content servers. The companyis products are used by many of the biggest names in corporate America. However, Akamai is best known for its high-profile position in the technology boom and bust cycle of the late 1990s. At one time Akamaiis share price was so high that Apple shares traded at a premium due to the companyis large holdings in Akamai stock. Akamaiis market value is now just over US$100 million, a mere fraction of its one-time value counted in tens of billions of dollars.
Apple Computer has previously announced that it will be taking a write-down on the companyis holdings in Akamai. Appleis planned write-downs of its investments in Akamai and Earthlink may cause the Mac maker to declare a loss in the September quarter. The combined write-downs will total between $30 and $40 million. On Monday Akamai closed at US$.90, off one cent.
Larry Ellison Departs From Appleis Board
On Friday Apple announced that Larry Ellison, CEO of Oracle Corp. and reported best friend of Apple CEO Steve Jobs, has chosen to leave Appleis Board of Directors. Mr. Ellison officially cited time pressures and his increasing role at Oracle, the worldis number two software maker, as the reasons for this departure. Mr. Ellison cofounded Oracle in the 1970s and built it into the worldis largest maker of database software. Oracle has come on tough times as corporate America and government buyers reduce technology budgets and slash IT spending. At this time Oracle does not have a president and Mr. Ellison has recently assumed more responsibilities at Oracle after several years of attempting to delegate day-to-day management of the software company to others.
Prior to the return of Steve Jobs to the helm at Apple, Mr. Ellison made a series of high profile statements that suggested he desired and had begun to plan a buy-out of the company. Appleis announcement concerning Mr. Ellisonis departure from the Board clearly states that Mr. Ellison will continue to offer advice to the company on an informal basis. Please see the TMO story on Mr. Ellisonis departure for more information.
Insider Trading Activity
The stock trading activity of Apple directors and employees continues to find its way into the media spotlight. Last week The Mac Observer reported on new buying of Apple shares by executives and directors following large sales of shares by members of Appleis senior management team prior to the end of the June quarter. This morning Macworld UK also reported on the new buying activity. The Mac Observer continues to follow this story closely and will provide readers with immediate news coverage of additional stock buying or selling activity by Apple insiders.
Members of Appleis senior management team exercised stock options and sold the corresponding shares in the weeks ahead of last quarteris earnings warning. The warning drove down the price of Appleis stock. Many factors contribute to the timing of option exercises and stock sales and company insiders have a short regulatory time window in which to exercise options and sell shares. Company insiders must often notify the company and the company must notify regulatory agencies weeks ahead of a planned stock transaction by a company insider. Recent stock purchases may be a harbinger of better times to come for Apple, its shareholders and employees.