Apple's Earnings Report Overshadows MACWORLD Announcements

Wednesday Market Activity

The markets advanced on Wednesday, in sharp contrast to the most recent trading sessions. However, investor concerns about the quality of corporate earnings as the reporting season enters full swing put a damper on investor enthusiasm and kept a lid on prices.

Early in the day the markets moved significantly higher with the Dow Jones Industrial Average up in intra-day trading as much as 250 points. Intel provided the markets with an upbeat forecast, despite a disappointing second calendar quarter. Apple chip maker Motorola moved up more than four percent as the company informed analysts that although it had recorded a record loss of US$2.3 billion in the second calendar quarter, cost cutting efforts and strength in its mobile phone business will return the company to profitability in the current three-month period.

Many investors see technology stocks as fertile ground for value investments, but lingering concerns over recent accounting scandals and a pensive "wait and see attitude" regarding second quarter financial reports are keeping many traders on the sidelines.

At the close of trading on Wednesday the Dow Jones Industrial Average was up 69.37 at 8,542.48. The S&P 500 advanced 4.99 to finish at 906.04. The NASDAQ Composite Index moved higher by 21.99 to end Wednesday trading at 1,397.25. Apple closed down $2.23 or roughly twelve and one-half percent at $15.63 in frenzied trading of more than 21 million shares.


Apple opened significantly lower following its earnings report after Tuesdayis market close. Although Appleis revenues and earnings were in line with lowered estimates released in June, Apple executives cautioned analysts that revenues in the current quarter will be flat sequentially and the company may report a net loss in what is its fourth fiscal quarter due to write-downs of the value of investments and one-time charges relating to layoffs at the companyis Sacramento plant. The earnings warning clearly overshadowed the companyis new product announcements at the New York MACWORLD Expo, which opened yesterday with a keynote address by CEO Steve Jobs.


In the keynote address at MACWORLD Expo in New York, Apple CEO Steve Jobs unveiled a new, 17" LCD iMac, a 20-gigabyte iPod and a revamped iTools program called .Mac that will now be a paid service with enhanced features. Mr. Jobs also announced that Mac OS X 10.2, code-named Jaguar, will soon be available at a cost of US$129.00.

Despite the abundant product news, the announcements failed to quench the thirst of analysts who are looking for positive news about Appleis future revenues and earnings picture. At yesterdayis closing price Apple is trading close to its 52-week low of $14.68 per share. With a sizeable cash position of about US$4.3 billion, at Wednesdayis closing price the market values Appleis patents, properties and brand name at about US$1.25 billion.

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