Apple stumbles, warns of lower earnings

The computer maker tells investors that this quarter's earnings will fall short of expectations because of a shortage of key processors.

Apple Computer shares tumbled today following the company's warning of lower than expected earnings.

Apple yesterday warned investors that this quarter's earnings will fall short of expectations because of a shortage of key processors, the first bleak report in the company's year-long turnaround.

Apple stock plunged almost ten points in after-hours trading last night. In early morning trading today, Apple was down more than 9 percent, to 71.69.

Apple said computer shipments, revenues, and earnings will be lower than last quarter's numbers, citing problems in obtaining enough G4 chips from Motorola. The G4 chip is used in Apple's recently announced Power Mac G4 computer.

The computer maker will report earnings between $75 million and $85 million on October 13, it said.

"We are very disappointed that this quarter's deliveries of G4 processors will be lower than planned. Orders for the Power Mac G4 have been strong, and we anticipate ending the September quarter with a substantial order backlog," said Fred Anderson, Apple's chief financial officer, in a statement. "We continue to expect significant year-over-year growth in units and revenue in the December quarter."

With the release of the highly popular iMac, as well as the new iBook notebook and high-end G4 computer, Apple has engineered a stunning reversal from its problems of the mid-'90s, when its market share and stock price hit new lows. But the company's history of problems with suppliers led some analysts to question the company's dependence on Motorola as the sole manufacturer of the G4 chip.

Apple cofounder and interim CEO Steve Jobs maintained that the supply problem is temporary.

The new G4 PowerPC chip, running at speeds of 400, 450, and 500 MHz, is designed to speed tasks such as encoding digital media and running Internet applications such as security software and Apple's own QuickTime streaming technology.

The 400-MHz G4 desktop computer is priced at $1,599, while a 500-MHz system with DVD-RAM--the industry's first to ship with a recordable DVD drive--was expected to be released in October for $3,499.

Motorola said the supply problem is under control.

"We're thrilled with the overwhelming and positive response in the marketplace for the PowerMac G4," the company said in a statement. "This response has made it difficult for us to provide as many of the G4 chips as Apple can currently use. ...There are no surprises here."

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