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Apple up despite uncertainty

Apple's market share is on the slide, but the computer maker's stock is on the climb.

    Apple's (AAPL) market share is on the slide, but the computer maker's stock is on the climb.

    The company's stock has gained about 15 percent this month, on little news. Apple shares rose as high as 20-7/16 at yesterday's close, up from earlier this month, when the stock traded down 17-3/8.

    Speculation that big news about saving the company is on the way has helped to propel the stock, despite the fact that Apple has been losing critical share in the education market, where it once dominated. (See related story)

    Expectations that Apple soon will name a new chief executive are running high. The company delayed its annual shareholder meeting, which had been set for February 3, catching investors anticipating an announcement on the progress of the CEO search off guard. Many now think that a new successor will be named before the meeting, now tentatively scheduled for April 22, is held.

    The company's headhunter recently said in published reports that a new CEO would be named in the next 30 to 45 days. The search is now in its seventh month.

    Subtle changes in the company's channel, coupled with price cuts on older products, also may be seen by investors as a sign that big news is on the way. Moreover, Apple's stock has been holding its head above the $20 threshold, which analysts say is a critical psychological barrier.

    "Holding at that level says people are getting more confident with Apple's recovery process," said Gerard Klauer Mattison analyst Lou Mazzucchelli, adding that some investors are looking at the company's fundamentals and saying it might not be a bad time to get back into Apple stock.

    The company has been posting strong sales of its PowerPC G3, another indicator that Apple could be primed for a comeback.

    "A lot is going on," Mazzucchelli said. "People think they might pull another profitable quarter, and two in a row would be an event."

    Other analysts, however, said that Apple's upward lift may be coming from hot air.

    "Real investors aren't paying attention," said Wasserstein Perella Securities analyst Steven Dube. "Some speculators are looking at peripherals, but at this point there really aren't any fundamentals to justify pushing the stock up."

    In addition to losing market share and watching revenues fall, Apple executives acknowledged that the company's current product offerings fail to take into account strong consumer demand for inexpensive computers. Apple has said it is considering entering the sub-$1,000 PC market, but has yet to announce a commitment to that price range. Currently, consumers need to spend at least $1,500 to buy a Macintosh, said an Apple Europe general manager.

    Additionally, Apple products are getting harder to find in major retail stores, as the company has pulled out of four major computer retail stores. Apple products no longer will be available at Best Buy, Circuit City, Computer City, Office Max, and Sears so that the company can focus its distribution efforts on its "store within a store" presence with national computer retailer CompUSA (CPU).

    Mazzucchelli argued that getting out of some retail channels is a step in the right direction for the beleaguered Apple. "Tossing out Sears and Best Buy eliminates a negative buying experience," he said, adding that, previously, when customers went to big retail stores to buy an Apple computer, they often ended up with an uninformative sales clerk and a dusty machine.

    Apple's decision to slip off retail shelves, however, doesn't mean it intends to let its image slip from people's minds. Earlier this month, the company launched an aggressive promotion effort with its "Think different" advertising campaign. It also is running a 30-second television commercial, and has placed its ads on billboards, in addition to magazines and newspapers.

    Dube, however, stressed that a company's image can only go so far. Even if Apple names a new chief executive, he said, it is a long way off from turning a name and a strategy into new market share.

    "We all remain hopeful, but one can't determine what the future valuation will be because there are just too many uncertainties," Dube said. He pointed out that Apple stock is likely to get pushed up more once a new CEO is named, but such market activity won't necessarily improve the company's fundamentals.

    Look at Silicon Graphics, for example. The company got a spike in its stock when it named Richard E. Belluzzo, former general manager of Hewlett-Packard's computer products organization, its new chief executive officer and chairman. It gained 22 percent the day Belluzzo was named, and peaked at a gain of 38 percent during the 7 trading days following his appointment, to 15-9/16, up from 11-1/4. The stock has since lost ground, sinking back to 13-3/4 at 10:25 a.m. PT today.

    This is a competitive marketplace, and Apple is losing real market share, said Dube. "Instant savior is not what these companies are all about."