Apple Plunges Most in 5 Years as Forecast Disappoints (Update6)
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Jan. 23 (Bloomberg) — Apple Inc. plunged the most in more
than five years in Nasdaq trading after its forecast missed
analysts estimates, stoking concern that consumers will cut back
purchases of Macintosh computers and iPod media players.
Apple fell 11 percent, the biggest drop since July 2002. The
stock, which more than doubled last year, lost $16.64 to $139 at
4:02 p.m. New York time in Nasdaq Stock Market trading.
Chief Executive Officer Steve Jobs spooked investors by
failing to meet the most optimistic projections for first-quarter
profit and forecasting sales growth that would slow to 29 percent
this quarter from 35 percent in the previous three months. IPod
sales were little changed in the U.S., signaling that demand for
consumer electronics may be waning.
“Theres just a nagging fear that a slowdown in high-end
consumer spending will impact Apple, said Gene Munster, an
analyst at Piper Jaffray in Minneapolis, who recommends buying
Apple shares. “IPod growth rates have been declining for 10
quarters, and that is alarming people.
Profit this quarter will rise to 94 cents a share on sales
of $6.8 billion, Cupertino, California-based Apple said
yesterday. Analysts estimated $1.11 a share in net income, and
revenue of $6.98 billion, according to a Bloomberg survey.
`Remain Confident
“We give guidance we believe we have reasonable confidence
in achieving, Chief Financial Officer Peter Oppenheimer said in
an interview. “We remain confident in our business.
Apple echoed Intel Corp., the worlds largest computer-chip
maker, which gave a forecast last week that trailed analysts
estimates. AT%26amp;T Inc., the biggest U.S. phone company, said this
month that it is experiencing some “softness in consumer
demand for phone and Internet connections.
Apples net income in the first quarter rose 57 percent to a
record $1.58 billion, or $1.76 a share. Sales gained 35 percent
to $9.61 billion in the three months ended Dec. 29.
While profit topped analysts estimates of $1.60 a share,
some investors were looking for as much as $2, said Jane Snorek,
who helps manage more than $70 billion in assets at First
American Funds in Minneapolis.
“The guidance was also probably light to most people,
Snorek said. “They missed the consensus forecast for sales by a
wide margin.
Apple shares have a higher ratio of price to future earnings
growth than rivals Hewlett-Packard Co. and Dell Inc., according
to Bloomberg data. At $122 billion, Apples market value today
still tops Hewlett-Packards $111 billion.
IPod Sales
Apple sold 22.1 million iPods in the quarter, missing the
24.5 million estimate of Benjamin Reitzes, an analyst with UBS AG
in New York. In September, Jobs introduced a new version of the
iPod Nano that can play video. He also added the iPod Touch,
which uses the same widescreen display built into the iPhone.
While the Touch pushed up the average selling price of
Apples iPod line, the $299 player was shunned by some buyers in
the U.S., Chief Operating Officer Timothy Cook said yesterday on
a call with analysts. U.S. iPod sales in the quarter were little
changed from a year ago, he said.
“The iPod unit number for the knee-jerky types will
disappoint, said Jim Grossman, who helps manage more than 1
million Apple shares at Thrivent Asset Management in Appleton,
Wisconsin. He says he will probably add to his Apple holdings
because of demand for the Macintosh.
The decline in Apple shares was too large and reflects “a
recession scenario, Richard Gardner, an analyst at Citigroup
Inc., said today in a note to clients. The stock is cheap, given
that free cash flow per share will increase 20 percent to 25
percent in the next two years, he said.
Buying Opportunity?
The decline is a buying opportunity for investors, Gardner
said, as did analysts at Sanford C. Bernstein %26amp; Co., Bear Stearns
%26amp; Co. and Bank of America Corp.
Apple sold a record 2.32 million Macs in the quarter,
driving a 47 percent gain in sales to $3.55 billion. The company,
which gets half its revenue from the computers, is trying to
capitalize on demand for portable machines with the ultra-thin
MacBook Air, which goes on sale next week.
Jobs, 52, led a revival in Mac sales after incorporating
faster chips from Intel in 2006. Mac shipments topped more than 1
million in each of the prior 12 quarters, and reached 2.16
million in the period ended in September.
Yesterdays results included iPhone sales in Europe for the
first time. Apple sold 2.32 million iPhones in the quarter,
adding to the 1.39 million it sold through September.
Apple began selling the handset in the U.K., Germany and
France in November, after it went on sale in the U.S. in June.
The company will offer the Web-surfing mobile phone in Asia this
year, as well as in more countries in Europe, Cook said.
Apple still plans to sell a total 10 million iPhones in
2008, Cook said.
To contact the reporter on this story:
Connie Guglielmo in San Francisco at
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