Analyst: Apple's iMac Gaffe a Buying Opportunity

On the heels of Apple Computeris public admission that it will run out of stock of its existing iMacs some 60 days before it debuts new, re-designed models, one Wall Street stock analyst sees what appears to be a financial blunder as an opportunity for investors to buy the companyis stock.

Charles Wolf, an analyst with Needham & Co. in New York, said Friday that while iMac sales will definitely fall off as the supply of current iMacs dries up, "near-term weakness presents an excellent buying opportunity, because the issue is one of supply, not demand."

In reiterating a ibuyi recommendation to his clients, Mr. Wolf was realistic in saying that the situation would be a "non-event" had Apple not stopped production of its current iMac, but did say, "whatis important is that the new model will be available for the Christmas selling season."

The new iMac model wonit be ready until September, the company said in a statement late Thursday after the close of the stock market. Apple has stopped taking orders for the current version and expects to run out of them in the next few weeks.

"We planned to have our next-generation iMac ready by the time the inventory of current iMacs runs out in the next few weeks, but our planning was obviously less than perfect," Apple said in the statement.

The company refused to elaborate on why it ran out of current iMac inventories or why the new iMac models have yet to be released.

Some dealers and Apple retail stores contacted by The Mac Observer Thursday said they have already run out of all models - both 15-inch and 17-inch, despite Appleis statement Thursday that it still had adequate supply. Many consumers who were waiting for 15-inch iMacs bought through Appleis online store report being informed by the company in the past two weeks that they would be receiving the 17-inch model at no additional charge because they company had no more stock of 15-inch iMacs.

In terms of its financial impact for Apple, Mr. Wolf estimated that Apple would sell about 150,000 iMacs in the current fourth quarter, which ends in September. "Worst case, this number could fall to 50,000," he wrote.

"This in turn would knock about US$0.05 off September quarter earnings, bringing fiscal 2004 in at $0.55 instead of $0.60," he commented.

An Apple corporate representative told TMO Thursday that todayis announcement would have no affect on third-quarter earnings, which ended Wednesday, but declined to speculate on the impact for the current quarter, which ends in September. Apple will announce its third quarter financial results on Wednesday, July 14, and will webcast the conference call beginning at 5:00pm EDT.

Mr. Wolf also commented that pricing of the new iMac models will be crucial to the products success.

"Apple must drive the entry-level iMac price below $1,000 from $1,200 currently if it hopes to capture Windows users who have bought an iPod and our now considering the purchase of a Mac."