Apple Confirms Gloomy Profit Outlook
Apple Computer on Friday confirmed analysts’ gloomy opinions and said its earnings and revenue for the current quarter will slip below previous Wall Street estimates and will be down from second-quarter results.
The announcement spurred the already active trading in Apple’s stock and drove it down $1.625 a share to a closing price of $18.125--a 12-month low. More than 2.6 million shares changed hands Friday, making Apple the most active issue on the over-the-counter market.
Apple officials declined to give specific earnings projections for the third quarter ending June 28 but said retail sales of its computers had slowed in April and May. In the second quarter ended March 29, the Cupertino, Calif.-based company earned $10 million on sales of $435.3 million.
In recent months it has laid off more than 1,655 employees and closed some plants, and Friday the company said it will trim operating costs even further.
Apple’s announcement and analysts’ predictions of a further downturn in personal computer sales further jeopardize the upswing that had been expected for the company. Its 1984 earnings of $64 million, or $1.05 a share, generally were considered depressed.
But Friday, many analysts said they had lowered or will lower estimates of Apple’s 1985 earnings to slightly above the year-ago level.
Heavy trading of Apple’s stock began early in the day on word that Ulric Weil, an analyst with the New York brokerage firm Morgan Stanley, had reduced his 1985 earnings estimate for Apple by 40 cents to $1.10 a share. That is significantly below the $1.72-a-share average estimate, as of May 16, as compiled by Lynch, Jones & Ryan in its Institutional Brokers Estimate System. Estimates of Apple’s earnings--for both 1985 and 1986--have dropped about 21% in the past six months, a Lynch, Jones spokesman said.
Analysts’ concerns have focused on Apple’s troubled foray into the business-use market, but Friday they also stressed disappointing retail sales of consumer-oriented computers.
Harvey C. Allison of Wertheim & Co. in New York said price cuts announced Friday by IBM were further evidence of the market’s sluggishness and will put even more pressure on Apple. He believes that his per-share earnings estimate of $1.25 “looks like it will be on the high side now.”
IBM said it was paring prices of the basic PCjr model, production of which has been discontinued, by more than 27% to $725; the price on the larger, Portable Personal Computer was lowered nearly 25% to $1,950.
