The markets moved lower on Tuesday due in part to disappointing economic numbers. This time it was the governmentis gauge of industrial production that came in below expectations. On Tuesday, fast food giant MacDonaldis issued an earnings warning and announced that it is cutting the number of new store openings, reducing the velocity of its share buy backs and focusing resources on modernizing many of its older fast food stores. McDonaldis share price dropped almost thirteen percent following the news as investors revaluated the long-term growth prospects for one of Americais most storied businesses. The McDonaldis news slashed hopes that strong corporate revenue and earnings growth will return anytime soon.
Oracle, the worldis number two software maker reported operating earnings in line with forecasts, but the companyis cautious outlook moving forward pushed the stock lower in after hours trading. Businesses have yet to increase software and other technology purchases. Interesting to note that Oracle experienced a significant fall off in sales to education customers during the quarter. Schools, like businesses, work from budget plans often developed a year or more in advance. Companies such as Oracle and Apple may not see a rebound in education sales until well into next year. In Wednesday trading Oracle finished off $.71 at $8.32.
Wednesday Trading Activity
On Wednesday the markets reacted to another blow in the form of an earnings warning from J.P. Morgan Chase. The banking and investment firm announced that earnings for the quarter were tracking below the second quarter results. Shares of other banking and investment companies fell in sympathy with J.P. Morgan which lost more than five percent on the day.
Cisco Systems announced on Wednesday that its order backlog had fallen more than thirty percent. The fall off in orders not only impacts the marketis view of Ciscois earnings for the next couple of quarters, it also indicates that the pace of business spending on technology hardware has failed to quicken during the current calendar quarter.
On Wednesday the Dow Jones Industrial Average ended at 8,172.45, down 35.10. The S&P 500 Index was off 4.06 at 869.46. The NASDAQ Composite Index shed 7.81 to close at 1,252.13. On Tuesday and Wednesday Apple bucked the broader market trend, moving higher during both trading sessions. On Wednesday Apple added $.22 to close at $15.02.
Apple continues its torrid pace of retail store openings with two new stores welcoming customers this weekend. Apple has continued to open new retail stores despite the soft consumer market for PCs. The company is hoping for a solid holiday selling season due in large part to its numerous retail stores in high-traffic and prestigious locations. Appleis ubiquitous "switch ads" are designed to induce potential Wintel converts to visit Apple stores for a first hand look at the Mac makeris products and reduce the number of trips a "switcher" makes to the store before choosing to purchase an Apple product.
On Tuesday Apple announced that the number of .Mac service subscribers has surpassed 100,000 and that the company is adding new subscribers at the rate of more than 1,000 per day. In July Apple converted and re-branded its free iTools service to a fee-based service called .Mac. Users of the free iTools service are given until September 30, 2002 to convert their free accounts to the fee-based service and were provided a one-time discount on the cost of the first yearis fees. The conversion of the service from a free program to a fee-based service angered many users of the iTools service despite the enhanced products and services offered to .Mac subscribers. Please read the TMO story on Appleis announcement.
Apple In Education
Business Week Online takes a look at Macs in schools and the Macs versus Windows debate. After reviewing the column a few things comes to mind. Over the years, sales of Macs to schools have followed a cyclical path. Following the release of the original Bondi blue iMac, Apple experienced sensational sales to schools due to pent-up demand for new Apple computers. Further, most Mac educational software in the K-12 market is written for OS 8 and OS 9. The lack of an advantage to move to OS X may stall efforts at many schools to purchase new Macintosh computers.
Appleis efforts in education have been focused on school-wide sales, emphasizing wireless networking options and solutions such as the PowerSchool Student Information System. Whether or not this is the best approach for Apple in the education market will be determined in time.