Apple Stock Tumbles on Report of Slower Sales
Apple Computer said Tuesday that it expects slowing sales rates and declining profits for the current quarter, providing yet more evidence of the weakening U.S. computer market.
The surprise announcement, coming just two weeks after a top Apple executive said the personal computer maker expected robust sales growth worldwide, sent shares of the company’s stock tumbling amid heavy trading. Apple’s stock, the most actively traded on the over-the-counter market Tuesday, fell $3.25 per share to close at $36.
In the last two days of trading, Apple shares have dropped $5.75, the equivalent of nearly 14% of the company’s stock market value.
“There’s no doubt that the domestic computer market is slowing,” said Steve Ossad, an analyst at Montgomery Securities in San Francisco. “And Apple is feeling the pinch.”
Apple is the latest in a string of computer makers to announce sales and profit disappointments. International Business Machines, Digital Equipment and Unisys, the Big Three computer makers, have all posted sagging performances during the year and have announced plans to cut their huge staffs.
Throughout the year, analysts have generally blamed these disappointing performances on the slowing economy, lagging demand for their multimillion-dollar product lines and a growing preference for smaller, less expensive and increasingly more powerful desktop models made by such hard charging competitors as Sun Microsystems, Compaq and even Apple.
However, analysts said, the downturn that has afflicted the bigger industry players is now winding its way down to makers of smaller systems, as businesses and consumers alike gird themselves for a long-expected economic downturn.
“As personal computers become a bigger part of the economy, they become more subject to the same economic forces as other capital goods,” explained Bruce Lupatkin, an analyst at Hambrecht & Quist, a San Francisco brokerage.
Lupatkin and other analysts also noted that Apple has apparently been hit by IBM’s latest round of price cuts on its personal computers. IBM, the world’s biggest computer company, has been slashing prices of many of its models--large and small--as it attempts to reassert itself as the dominant player in its markets. The tactic has been blamed for the declining profits at IBM, as well as at many of its competitors.
In a terse announcement Tuesday, Cupertino-based Apple said it expected sales during the first quarter of its fiscal 1990 would exceed the $1.4 billion posted a year ago, but they would be lower than the company and analysts had previously expected. However, the company said, profits would dip below the $140.5 million recorded in the year-ago period.
Apple’s announcement came just two weeks after Donald P. Casey, the firm’s vice president of networking and communications systems, told analysts in New York that the firm expected worldwide sales growth of more than 20%. Casey also said the company projected U.S. sales growth of 15% to 18%.
Analysts said the news from Apple underscores the extent to which the company has grown away from its roots as a supplier of computers for home users. The company also acknowledged Tuesday that it expected disappointing sales for the Christmas holiday.
Analysts added that sales of Apple’s home models and lower-priced office systems have been especially sluggish in recent months, in part because the machines have not been updated for a long while.
