Apple shares fell as low as 12-3/4 in morning trading, down from its close of 13-11/16 yesterday. The stock finished the day at 13-1/4.
The company announced yesterday that Gilbert Amelio, chief executive, had resigned. Apple also announced its cofounder Steve Jobs would take an expanded role, while its chief financial officer Fred Anderson would be responsible for daily operations until a CEO successor is named.
"I think the rational investor will look at [Amelio's departure] indifferently. His departure is not a big surprise. It's the result of a bad situation that everyone already knew about," said Daniel Kunstler, an analyst with J.P. Morgan Securities.
There is no "silver bullet" to fix Apple's financial woes and that it will take a new CEO time to establish goals and an action plan, Kunstler said.
He is also worried about Apple's current situation: "With the timing of Amelio's departure, just before the earnings release, the thought has crossed my mind that something is seriously amiss in the quarter," he said.
Rick Berry, an analyst with Murphey, Marseilles, Smith, also said that Amelio's resignation is not much of a surprise. "Everyone has been disappointed?17 months on the job was long enough to turn the company around," he said.
Berry says that a buyout of Apple at this point is much more likely than a turnaround.
"At some point the stock becomes of value. They only have 3.5 percent market share, but they still do $7 billion in revenue, so at some point the price may actually warrant someone buying the company," he said.
Apple's Anderson said in a conference call that the company is not interested in selling.
Apple, which released its news after the market's close, saw its stock yesterday dip to 13-11/16, down 1/16 over the previous day. Over the course of the past few weeks, Apple's share price has dipped to new 12-year lows on news that an investor unloaded 1.5 million shares and a Macintosh clone vendor Power Computing would also carry the Windows-Intel platform on its computers.
Amelio's departure comes just a week before the company reports its third-quarter results on July 16.
Apple, which reported a whopping second-quarter net loss of $708 million, is expected to shrink its loss to $68.2 million for the third quarter, according to a consensus of analysts by First Call. But analysts estimates vary widely, from $121 million to as low as $11.3 million.
Analysts' recommendations on the stock were less diverse. Of the 23 analysts that follow Apple, 19 vote for a "hold" on the stock, according to First Call. Of the 4 remaining, one rated the stock "unattractive," another recommended a "strong sell," and two analysts have rated the stock as a "buy."
But at least one analyst was skeptical of the ratings. "We do have an upward bias on the ratings. Not a lot of analysts will cover stocks that they don't like," said Rob Gowen, a spokesman for First Call.
J.P. Morgan's Kunstler had expected the company to post a loss of $80 million on revenues of $1.9 billion for the quarter. He added that third-quarter revenues are expected to fall 13 percent below levels achieved last year at the same time.
The acid test will come when the company releases its unit shipments for the quarter. Kunstler said that Apple needs to ship at least 800,000, a benchmark set last quarter.
The number of Apple PCs shipped and sold during the second quarter dropped 15 percent from last year, according to Matt Sargent, an analyst at Computer Intelligence. Apple was No. 6 among vendors for units shipped and sold this quarter.
Sales of Apple products has been dropping for the majority of resellers in the country, according to the resellers themselves. Even sales partners with strong Apple bases barely have been able to maintain sales. Chris Ferry, senior vice president of Graham MicroAge, a large Apple dealer in the midwest and one of Apple's largest education dealers, said that although Apple sales have stayed relatively even, it was only because of a few exceptional PowerBooks deals. Without those projects, sales would have dropped.
Meanwhile, institutional investors were pleased with the news. CalPERS, an investor and shareholder activist, described the management change as "long overdue."
"It's gratifying to see Apple's board took this independent step that's necessary for the future success of the company? and shareholders as well," said Brad Pacheco, a CalPERS spokesman.
The pension fund giant holds 709,565 shares and had placed Apple on its target list of top-ten underperforming companies. CalPERS had a meeting with Apple's board members and management scheduled for yesterday to discuss the computer maker's plans to restore profitability, but the company last week asked to postpone the meeting.
"We still plan to meet with the board, and in particular with the executive search team," Pacheco said. "CalPERS wants to know the skills they are seeking in a new CEO and discuss the strategic direction that this team has planned for the company."
No date has been set yet for that meeting.
One stock fund, which sold its 340,000 share stake in April when Apple's stock got a sudden jolt on talk of a buyout by an investment group headed by Oracle CEO Larry Ellison, said pulling out was a "no brainer."
Parnassus Fund head of research David Pogran, said, "We did the right thing. We don't see the catalyst. We look for undervalued companies with a catalyst over the next 12 months and we have not identified what that would be for Apple."
But, if a chance of a turn around becomes a possibility, Pogran said it would consider buying back in.
"A successor could be the catalyst we are looking for. We are not religiously opposed to investing in Apple, but it would have to be a show-me type situation. There is some X factor out there that prevents this company from turning around," he said.
Pogran said he has mixed feeling about the passing of the torch because the new blood could fuel growth or just create more turmoil. "Will this change result in delays of new products, like Rhapsody?" he asked.