Apple Shares Sink on Forecast of Lower Profit

Apple Computer Inc. said today that it expects lower profits in its second fiscal quarter due to excess inventories of memory chips.

Wall Street was caught off guard by the announcement, which triggered a sell-off of the personal computer company’s shares. About 11:30 a.m. EST, Apple was down $3.875 at $37.875, up slightly from the day’s low of $36.25.

Analysts had been expecting the Cupertino-based company to earn about 65 cents a share for the quarter ending March 30.

“I think a lot of analysts are wondering why they didn’t let us know about this two weeks ago,” when Apple briefed analysts after it reported first-quarter results, Ed Spelman, computer analyst with Oppenheimer & Co., said. At that time, the company said it was on track to earn about $3.70 a share on revenue growth of 30% to 35% in fiscal 1989.

30% Increase Now Expected

Apple said today that it now expects that its revenues will be up only 30%, and analysts said they are trimming their earnings estimates about 25 cents a share.

The company said it bought large amounts of 1-megabyte dynamic random access memory chips (DRAMs) last summer in order to meet expected demand. It said the purchases were made at peak prices due to a worldwide shortage of the chips.

Apple raised prices in the United States in September in order to pass on the costs. But customers reacted by buying less expensive Macintosh models equipped with smaller memory capacities and turned elsewhere for cheaper products to add memory to the system.

“While customers continue to purchase the Macintosh SE and Macintosh II computers in high volumes, they are choosing systems that contain less built-in memory and storage,” the company said in a prepared statement.