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Apple stock up on earnings report

Apple's smaller-than-expected third-quarter loss, which fooled most Wall Street analysts, boosts its stock 1-1/16.

Investors polished Apple Computer's (AAPL) stock today, temporarily pushing it up more than 10 percent in morning trading a day after the troubled computer maker posted a smaller third-quarter loss than analysts expected.

Apple, which recently saw its stock hit a 12-year low, watched its share price jump as high as 18-1/8 before ending the day at 17-1/2, up 1-1/16 from yesterday's close. Trading volume reached a hefty 6.7 million shares.

The company got more good news when analyst Keith Bossey of Robert M. Cohen initiated coverage of Apple with a "speculative buy" and set an 18-month target price of $32 per share. Bossey sees 1998 as a "year of rebirth for Apple" and, with the resignation of CEO Gilbert Amelio, marks the beginning of a transition from a restructuring company to one focused on targeted growth.

Before yesterday's news, a number of other Wall Street analysts had missed the mark by a wide margin, a handful managed to stay within a 6-cent range of Apple's third-quarter loss of $56 million, or 44 cents a share.

According to First Call the consensus estimate on Wall Street was for the company to post a loss of $77 million, or 61 cents a share.

One analyst of the 25 that follow Apple hit it on the nose.

Charles Wolf, an analyst at Credit Suisse First Boston, pegged Apple's third-quarter loss at 44 cents a share.

"I made this estimate in April," said Wolf. "When I heard the news about Amelio leaving, and heard so many conflicting stories on why, I didn't think it was appropriate to change my number. It turned out it was the right thing to do."

When Amelio was ousted last week, speculation swirled on Wall Street that his departure was prompted by Apple's third-quarter results coming in below expectations.

Those taken with Wolf's acumen may want to know that he is not sticking to his early estimates for Apple's next quarter. He said that based on Apple's conference call yesterday with analysts, he has changed his fourth-quarter projection to a loss of 25 cents from a 6 cent loss. And he has lowered his fourth-quarter revenue estimate to $1.8 billion from $2.44 billion, based on expectations that unit shipments, especially in entry-level and PowerBook lines, will come in lower than his previous estimates for the fourth quarter.

Apple cited a softness in those areas in its third-quarter results.

Meanwhile, Michael Kwatinetz, an analyst with Deutsche Morgan Grenfell, missed Apple's earnings mark by just 4 cents, forecasting a loss of 48 cents a share.

"It was pure luck," he joked. "It's tough to forecast Apple because so many things are going on at the company and there is no normality with the company and no historic trend line to look at."

So Kwatinetz allowed for the seasonality of the business and the embattled computer maker's efforts to clear out excess inventory from its channel.

He noted that his estimates for Apple's gross margin were on the spot while operating costs came in a little lower than he had anticipated.

Other brokerage houses that came within the 6-cent range include Donaldson, Lufkin & Jenrette, Salomon Brothers, PaineWebber, Hambrecht & Quist, and Montgomery Securities.