Markets Fall and So Does AAPL On Day Before Q4 Earnings Announcement

Investors are asking: If the third quarter earnings picture looks only so-so, then what will future profits look like once the effects of a slowing economy really kick in? Even the companies that meet earnings have given cautious guidance going forward. Appleis stock lost ground in heavy trading.

Donit underestimate the big shadows cast across the market just now. The threat of war in the Middle East and the uncertainty of who will lead the US government after January have many investors sitting this one out. A serious oil slowdown from the Middle East could really damage the global economy and whoever wins the US Presidency will determine how the US handles its debt, determining how well the dollar will fare in the future.

Tomorrow tech stock activity is expected to be guided by what IBM and Intel announce as last quarteris results and their guidance going forward.

Appleis stock shed 1 3/8, or 6.40%, to close at 20 1/8 on volume of 10.6 million share. Many investors feel if the risk of buying AAPL before Cupertinois conference call tomorrow isnit worth the possible gain.

Tomorrow after the stock markets close Apple will report their 4th quarter earnings, which are expected to fall well below what investors had been hoping for. This quarter is the first since 1997 that Apple has failed to beat forecasts handily.

Rumors are that Fred Anderson will announce earnings and revenues stronger than the lowered guidance, leading some traders to speculate that AAPL could move higher. However, Mr. Anderson warned on September 28th, "We are currently reevaluating our plans going forward, and will provide lower growth targets for next quarter and the next fiscal year when we announce our final results on October 18."

Apple will provide live audio streaming of its fiscal year 2000 and fourth quarter results conference call via QuickTime on Wednesday, October 18 at 2 PM PDT.

A Motley Fool columnist points out why Apple is a better buy than Cisco even if, "Cisco may be the better business than Apple":

"With its stock at $22.06 on Friday, Appleis market cap was $7.2 billion. If you add $300 million of long-term debt and subtract $3.8 billion of cash and value $1.2 billion in non-cash investments at a conservative $400 million, then Appleis enterprise value is $3.3 billion. The company generated $722 million of free cash flow (assuming a full 35% tax rate; the actual figure was $807 million) on sales of $7.4 billion in the most recent 12 months, a 9.7% margin, so it is now trading at a mere 4.6 times trailing free cash flow."

A Wall Street Journal article illuminates critical failures in Appleis sales system has led to a hemorrhaging of market share in education sales:

"Many schools and universities — the mainstays of Appleis customer base for years — are phasing out their Macs in favor of personal computers based on the rival Windows operating system. The trend has accelerated over the past 12 months. Just last year, Dell snatched top-dog status from Apple in terms of revenue from education, claiming 15.1 percent of the market. Apple dropped to a 12.5 percent market share, down from its winning 14.6 percent share in 1998, according to Dataquest Group."

The Nasdaq lost 76 (-2.32%) to close at 3213 on volume of 1.8 billion.

Internet stocks came unglued. Yahoo fell 6 5/16 to 48 15/16, the Internet leader has lost about $109 billion in market capitalization since its high. Amazon hit a new 52-week low down 2 3/8 to 21 15/16. AOL also made a 52-week low off by 9.11 to 43.50.

The Dow lost 148 points (-1.45%) to close at 10090 on volume of 1.14.

The S&P 500 lost 24.42 points (-1.78%) to close at 1350.20

In Apple related businesses: IBM jumped 1 7/8 to 113 dollars. The company announced after the market closed earnings of $1.08 as forecast, but revenues came in at $21.8 billion, hit by the weak euro. Forecasts were for IBM to have revenues of 22.4 billion. The profit margin was flat at 35.8% and IBMis PC unit was profitable again, for the first time in 3 quarters. IBM was trading as low as 106 dollars in after hours trading.

Adobe lost 8 3/16 to 133 5/8 after Paine Webber downgraded the stock to "attractive" from "buy" because of weakens in color printer and Mac sales, combined with broad weakness in tech spending. Paine Webber wrote, "None of these factors by themselves would be enough to make us pull back the reins, but taken together, these factors could limit the kind of upside to results that would warrant a more aggressive stance at this time." Paine Webber maintains its earning forecast for $0.56 for Q4 and a price target of $160.

Akamai fell 3 15/16 to 48 15/16. Earthlink lost 7/16 to 6 1/2, a new 52-week low.

Appleis competitors: Dell lost a dollar to 24 3/8. Compaq shed 1.17 to 24.24.

Shares of Microsoft climbed 1/4 to 50 5/8 after yesterdayis new 52-week low. The Redmond giant received an extra month from the European Unionis antitrust commission to respond to charges of business abuses made by competitor Sun Microsystems.

Intel rose 5/8 to 36 5/16. As the markets close Intel said they had earnings $0.41 per share, which matched analystsi earlier predictions before Intel had guided expectations lower to $0.38 per share and better than $0.28 made last year. Intel reported revenues of $8.7 billion and forecast revenues will be 8% higher next quarter.

The chip maker also cut its prices on some low-end Pentium IIIs by as much as 26% today. Advance Micro Devices responded in kind, lowering prices on Athlon and Duron chips by 32% and 46%, respectively. Ashok Kumar, a U.S. Bancorp Piper Jaffray analyst told the Wall Street Journal, "Intel has drawn a line in the sand at 85% market share, and they will use price to regain that share. You have the setting for a very malignant price environment."

Gateway was lower by 1.17 to 49.60. The San Diego-based PC vendor has fared better than most PC manufacturers in the recent downturn since it announced good earnings.

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Appleis stock activity, visit our Apple Stock Watch Special Report.

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