Apple shocks with earnings warning

Apple Computer became the latest big-name technology firm to warn of disappointing sales and earnings in its fourth quarter Thursday. The PC maker said it will miss analysts' estimate by 12 cents to 15 cents a share in the quarter.

Company officials said it will report sales of between $1.85bn (£1.13bn) to $1.9bn, just slightly better than $1.83bn it recorded in what most analysts considered a disappointing third quarter.

Apple now expects earning to fall between 30 cents to 33 cents a share in the quarter, well below the First Call consensus estimate of 45 cents a share.

Apple blamed slow sales of its Power Mac G4 Cube PCs as well as sluggish sales in all geographies and in its education business.

Its shares closed up $4.56 to $53.50 ahead of the warning but collapsed to $29 a share in after-hours trading. It's worth noting that Apple also issued a profit warning this time last year, but for much different reasons.

At the time, Apple said a shortage of chips used for its G4 computers kept sales and earnings below analysts' estimates. Apple did post a profit of $90m, or 51 cents a share, on sales of $1.34bn in the quarter, but that was still far below the original estimate of 76 cents a share.

"We've clearly hit a speedbump, which will result in our earning, before investment gains, approximately $110m rather than the expected $165m for the September quarter," said chief executive Steve Jobs in a prepared release. "Though this slowdown is disappointing, we have so many wonderful new products and programs in the pipeline-including Mac OS X early next year-and remain positive about our future."

Sanford Bernstein analyst Vadim Zlotnikov said he wouldn't characterise the fourth-quarter profit warning as a "speedbump," pointing out that Apple's recently battled through two or three major upgrade cycles for its popular powerbook and iMac machines.

"Overall consumer demand doesn't appear to be as low as Apple's numbers indicate," Zlotnikov said. "It looks like sales of its G4 cubes haven't taken off they way they expected. At least so far."

Apple's string of impressive quarterly earnings reports came to halt last quarter when it managed to top the Street's profit estimate but fell short of revenue targets. In the quarter, it earned $200m, or 55 cents a share, on sales of $1.83bn.

"I have a great deal of admiration for what Apple has accomplished lately, but they can't keep constantly redefining themselves," Zlotnikov said. "Every time Apple stumbles it hurts a bit more because they define their own market."

Tim Bajarin, industry analyst with Creative Strategies in San Jose, predicted better things for Apple as it enters the holiday season.

"I still expect them to be pretty strong with sales of the iMac in Q4," he said. "Cube sales may continue to be an issue into Q4, but consumer sales going into Christmas should make the next quarter pretty strong anyway.

The holiday season "is always one of their better quarters," Bajarin said. "Keep in mind that they've introduced a whole slew of new products. Sounds like this [quarter] was a bit of a blip. The next one at least should be better for them."

Apple shares moved up to a 52-week high of $75.19 in March after falling to a low of $28.69 last September.

Seventeen of the 19 analysts following the stock rate it either a "buy" or "strong buy".

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