Stephen Baker, analyst, PC Data
Only one analyst downgraded Apple on Thursday. David Bailey at Gerard Klauer Mattison cut the stock to "neutral" from "buy." About a dozen brokerages had already downgraded Apple on Sept. 29, following its earnings warning.
"Some of Apple's problems are very challenging and may not be easy to resolve relatively quickly," Chase Hambrecht & Quist analyst Walter Winnitzki wrote in a research note. Winnitzki lowered his earnings guidance for fiscal year 2001 from $1.50 per share to $1.15.
"While the shares are extremely cheap, visibility remains low. This is now a 'show me' story," Salomon Smith Barney analyst Richard Gardner wrote in a research note. Gardner lowered his earnings guidance for 2001 from $2.15 per share on revenue of $9.92 billion to $1.18 per share on revenue of $7.46 billion.
"Without more specific product details, we think Apple shares are for the patient," Gillian Munson, an analyst at Morgan Stanley Dean Witter, wrote in a research note.
Munson lowered her 2001 earnings guidance from $1.53 per share on revenue of $8.5 billion to $1.15 per share on revenue of $7.5 billion.
The bulk of the drop in earnings are expected come in Apple's first quarter of fiscal 2001, which is the current quarter. Because of the excess inventory, Munson dropped earnings per share estimates for the current quarter from 40 cents to 4 cents.
On Wednesday, the company posted earnings and acknowledged that it will have another disappointing quarter as it tries to burn off excess inventory.
In addition, in forecasting relatively flat sales for the coming fiscal year, Apple executives said the company has instituted a hiring freeze for nearly all of the company and is keeping a close eye on costs.
Excluding investment gains, the company said it earned $108 million, or 30 cents per share, on sales of $1.87 billion. Under the same criteria in the year-ago period, the company had $90 million in net income, or approximately 25 cents per share, split-adjusted.
Analysts had expected the company to report earnings of 31 cents per share, although Apple had said earnings could fall anywhere between 30 cents and 33 cents per share.
Wall Street had been looking for Apple to report earnings of 46 cents per share until a warning three weeks ago that sales for the quarter ended Sept. 30 would be between $1.85 billion and $1.9 billion, or "substantially below expectations."