Apple Computer Inc finally came clean and confirmed analysts’ fears yesterday and confirmed to investors that earnings this fiscal year are likely to be even worse than some of the weaker Wall Street projections of recent days. It said that earnings in the second half of fiscal 1993 will fall below the same period a year ago, when the company earned $1.88 a share, which implies full-year fiscal 1993 earnings no better than $4.13 a share. Analysts warn that that level undercuts the expectations of Wall Street, which had been growing restive about Apple’s earnings this week.
Strong
Apple’s statement said that while unit shipments for the Macintosh continue to be strong, an extremely aggressive pricing environment is leading to gross margins that are lower than the company previously expected. According to published industry reports, Macintosh continues to gain market share in a very competitive industry, the company said. However, our growth in unit shipments is coming at lower prices than we previously expected, and this will diminish our profitability during the second half of the fiscal year. Going forward, we remain committed to our strategy of market share growth, and we will be taking aggressive actions to accelerate sales momentum for our Macintosh products. Additionally, we will be taking appropriate actions to position the company for earnings growth even as we absorb lower gross margins. The announcement from Apple prompted a flurry of rating and estimate cuts with Smith Barney and Ladenburg Thalmann lowering opinions and S G Warburg downgrading its estimates. Apple shares had been falling since Monday when word first got out that analysts at Dean Witter and Bear Stearns were concerned about their estimates and planning downgrades. As a result of all the gloom, Apple shares fell sharply in busy trading ahead of the market opening yesterday on the news, and were trading at $45.25, down $4.25 on Tuesday’s closing price. The effect spilled over into other high-tech stocks – a report in the Wall Street Journal about heavy selling by Compaq Computer Corp insiders earlier this year did not help sentiment, and counters such as disk drive maker Quantum Corp and chipmakers Motorola Inc and Intel Corp as well as Compaq Computer Corp were all off.
