Apple Wobbles As Analysts Write Them Down

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Apple shares have fallen 10% in out of hours trading following weaker-than- expected guidance for its current fiscal quarter. Apple said it now expects second quarter revenue of $6.8 billion on a profit of 94 cents a share, below the average analyst estimates of $1.09 a share on revenue of $6.98 billion.

I have just sat in on the US analyst conference call where several analysts claimed that the whole consumer electronic sector was set to crash in light of a pending US recession.

Apple said during the call that second-quarter margins will decline worse than expected in a drop it blamed on a seasonally-weaker quarter and also on expected declining sales of its new Leopard operating system.

Sales of Apple’s signature line of iPod digital media players, which is a good barometer of consumer spending, will continue to slow in the quarter, Apple said. Meanwhile, iPod sales in the U.S. during the just-concluded quarter were flat, Apple reported.

Nonetheless, Apple Chief Financial Officer Peter Oppenheimer defended the company’s guidance, which would represent gains of 8% from year-ago earnings per share and 29% from year-ago revenue.

 

“We are giving very strong guidance,” Oppenheimer said in an interview. “We are very confident we will achieve it.”

Apple shares recently traded at $139.95, off 10% from its close Tuesday. That meant the company was losing about $13.74 billion in market cap after the bell. Apple shares, down 3.5% to $155.64 during the regular session, had been trading slightly higher after-hours before the earnings release.

Apple’s guidance was being more closely scrutinized Tuesday in light of the ongoing global stock sell-off sparked, in part, by fears of a U.S. recession and a slowdown in consumer spending. For example, the tech-heavy Nasdaq Composite Index fell Tuesday for the sixth straight day and to its lowest point since October 2006.

Apple is a decent barometer for tech spending in the U.S., especially by consumers, as 80% of the company’s sales come from within the country. In addition, slightly more than half of Mac and iPod sales, and the majority of iPhone sales, are in the U.S.; and up to 90% of these sales are driven by consumers and the education channel.

Apple isn’t the only tech giant to issue disappointing guidance this quarter. Last week, Intel delivered a cautious outlook, citing concerns of an economic slowdown. Bucking the trend is IBM,  which forecast strong earnings growth but mainly because of its international operations.

 

 

Adding pressure to Apple’s shares might be disappointment over the company’s first-quarter earnings. For the quarter ended Dec. 29, Apple reported earnings of $1.58 billion, or $1.76 a share, on revenue of $9.6 billion.

The results surpassed the company’s guidance as well as the average analyst estimates but fell short of the unofficial “whisper number” for Apple’s first fiscal quarter, which some pegged at $10 billion in sales and a $1.90-per-share profit.

 

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