You know Apple Computer is having problems when chief executive Steve Jobs makes an appearance on the company's earnings conference call. It's a shame Jobs can't rally Wall Street analysts the same way he rallies the faithful at Macworld.
Simply put, Apple lowered its fiscal fourth quarter earnings bar and still tripped over it. Needless to say, investors weren't pleased and shares stumbled in after-hours trading Wednesday. The company missed consensus estimates with fourth quarter earnings of 30 cents a share, detailed inventory problems, predicted a slight profit in what's supposed to be a seasonally strong December quarter and forecasted flat revenue for fiscal 2001.
In his tenure as Apple saviour, Jobs hasn't talked much to Wall Street. Jobs created the buzz and left the numbers to chief financial officer Fred Anderson. But following a profit warning and three weeks of silence, Jobs had to reassure investors when the official results came out. Jobs, who was out of his element with those skeptical Wall Street types, really had no choice.
The message from Jobs and Anderson was clear -- we know what's wrong and we're taking steps to fix it. All you have to do is put up with "two disappointing but profitable quarters" and believe Apple can concoct some great products to propel it in 2001. Anderson was confident about his revenue targets for 2001.
We're sure the religious Apple supporters will take the leap. But chances are pretty good Wall Street isn't buying it. Why? Executives offered no colour on what's in Apple's product pipeline or whether the company's sluggish September demand is picking up. Simply put, Apple is asking investors to take a leap of faith, but the jump-off point is slippery to say the least. You can expect a lot of negative comments from analysts today.
Apple, which has been the epitome of operation excellence in recent quarters, is facing an inventory glut largely because its G4 Cube is a flop. Anderson said Apple will take measures in the December quarter to reduce inventory. "We're taking the hit and will be ready to rock and roll and grow again in January," said Anderson.
We'll see. The good news is Apple seems to have a handle on what's wrong. The real question is whether it can fix the problems, some of which are out of the company's control. Here's a look at the issues:
That Jobs-ian spiel won't work on Wall Street -- you can't plug top-secret products into financial models.
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