Apple Squeaks Past Q3 Estimates By Two Cents, But Is Soft On Revenues

The rush of a new earnings season is upon us and investors are scrutinizing the latest batch of financial reports with more optimism than might be expected given the dire comparison with last yearis numbers. Appleis own third quarter earnings announced today came in at $61 million or $0.17 per share, beating expectation by two cents, but down from $200 million or $0.45 per share in the year ago quarter.

Apple reported sales revenues of $1.475 billion, down 19% from a year ago, while gross margins fell only slightly from 29.8% in the year ago quarter to 29.4%.

Fred Anderson, Appleis CFO, remains confident, "Weire delivering solid profitability while maintaining lean channel inventories in a weak economic environment. Our balance sheet remains very strong, with over $4.2 billion in cash, and we are targeting a slight sequential increase in revenues and earnings per share in the September quarter."

You can listen to all the details of Appleis Q3 conference call using QuickTime 5.0. Tomorrow, Apple will Webcast its semi-annual meeting for financial analysts from 11:00 a.m. (EDT) to 2:30 p.m. (EDT) in order to add some color to todayis numbers.

Meanwhile, chip giant Intel announced earnings 76% below the year ago quarter at $0.12 per share. Intelis sales fell to $6.3 billion, down 24% from the year-ago $8.3 billion.

Fed Chairman Alan Greenspan will testify before Congress on Wednesday, always a closely followed event on Wall Street. Investors will be reading between Chairman Greenspanis lines for any hint of further rate cuts, especially after todayis dismal industrial production report for June (down 0.7%, after a 0.5% drop in May) indicated inflation is the least of our worries. Industrial production in the U.S. is at its lowest level since 1983.

Apple jumped by 1.14 to close at 25.10 on above average volume of 10.3 million shares ahead of this afternoonis earnings announcement. However, in after-hours trading on the Island ECN, AAPL collapsed to 22.71 during the conference call, perhaps reflecting investor disappointment over Appleis shrinking revenue base.

In other Apple news, Susan M. Byrne, president and chief investment officer of Westwood Capital Management, explained to the Houston Chronicle her Apple stock trading strategy, which is based on Appleis undervalued position relative to the companyis strong cash position and rich brand name. Her one year price target for AAPL is $37.

According to Ms. Byrne:

"Even if the company imploded and someone came in to buy it, she reasoned, Appleis rich brand name and unusually loyal customers would draw at least a decent takeover premium...Even a fundamental valuation for Apple would draw $16.55 a share, given its cash position. As an attractive takeover candidate, with a loyal customer following, it could draw $37.38, she figured."

Fortunately, it doesnit look like Apple is going to implode anytime soon. Tomorrow morning at 9 am ET, Appleis CEO, Steve Jobs, will surely have something to say about Appleis future in his keynote address at MacWorld. Donit miss it.

The Nasdaq climbed by 38 points (1.88%) to close at 2067, on volume of 1.6 billion shares trading.

The Dow soared 134 points (1.28%) to close at 10606, on volume of 1.2 billion shares after a number of old-school businesses -- such as Pfizer (PFE), General Motors (GM), Kodak (EK) and Caterpillar (CAT) -- elevated investor optimism by beating Wall Streetis admittedly low expectation for earnings.

The S&P 500 climbed 11.99 points (1.00%) to close at 1214.44.

Adobe gained 1.74 to close at 41.17. Yahoo! posted new insider trading data (Form 144 filings) for Adobe today.

Akamai gained 0.72 to close at 8.64. The streaming media delivery company will report Q2 earnings on Wednesday afternoon. Akamai is expected to grow sales to $42 million from $40.2 million last quarter. However, as expected, Akamai is still in cash burn mode - the earning consensus is for negative $0.50 per share compared to a loss of $0.54 in the first quarter and a loss of $0.50 per share the year ago quarter.

Earthlink lost 0.50 to close at 16.04. The Internet access provider will announce earnings Thursday afternoon and is expected to post a loss of $0.27 per share, same as last quarter but better than the $0.29 loss from the year ago quarter. First Callis consensus is for Earthlinkis quarterly sales to come in at $301 million, up from $295 million in the previous quarter and significantly higher than the $231 million reported a year ago.

Meanwhile, a report by Gartner Dataquest suggests that Internet usage has reached a saturation point, at least in the United States.

IBM climbed 0.71 to close at 108.53. Merrill Lynch computer hardware analyst, Tom Kraemer, commented that business demand is deteriorating in the sector and wonit return till 2002. IBM is expected to report earnings of $1.15 per share on revenues of $22.6 billion tomorrow afternoon.

Macromedia lost 0.30 to close at 17.55.

Motorola gained 0.96 to close at 18.11. Motorola, in conjunction with AT&T Wireless Inc., began the first commercial U.S. roll out of high-speed data services for phones using the GPRS (General Packet Radio Service) protocol in Seattle, reports The Industry Standard.

Dell climbed 1.62 to close at 28.74.

Gateway gained 0.57 to close at 15.81.

Compaq gained 0.41 to close at 15.81 after announcing changes to emphasizing services to grow profits. According to the New York Times, "Compaq has said it intends to increase its services revenues, from 17 percent of the companyis sales last year to more than 30 percent within three years."

Intel gained 0.77 to close at 29.90. Intel beat earnings expectations by two cents at $0.12 per share for Q2, but thatis down from $0.50 per share a year ago. ABN AMRO had forecast INTC will fall to below $20 if the company misses earnings and downgraded Intel to "reduce" from "hold." Even if the chip giant meets this quarteris expectations ABN AMRO believes Intel will be forced to significantly lower 2001 and 2002 earnings estimates.

Microsoft gained 0.64 to close at 108.53. The convicted Sherman antitrust violator will announce earnings on Thursday afternoon.

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