Home / / Apple stock tanks on earnings forecast

Apple stock tanks on earnings forecast

Apple lost half its market value over the weekened as it said results for the quarter would not meet expectations.

Apple Computer's market value has virtually halved overnight after it posted a fourth quarter profits warning late last week.

The company's share price fell by $27.75 to $25.75 in a single day after it said fourth quarter profits would come in at $110 million instead of the expected $165 million.

That amounted to $9 billion off the company’s market valuation. Apple said that the profits shortfall was due to sluggish sales of its new G4 Cube and slow “back to school” September sales, traditionally a strong area for Apple. “Three factors contributed to our revenues and earnings coming in below expectations,” said Fred Anderson, Apple’s chief financial officer, in a statement.

“First, we experienced lower than expected September sales due to a business slowdown in all geographies. Second, our education sales, which normally peak during September, were lower than expected. And third, our Power Mac G4 Cube is off to a slower than expected start, resulting in revenues below expectations,” he added.

Investment banks downgraded their ratings on Apple as a result of the news. Bear Stearns downgraded to ‘neutral’ from ‘buy,’ Banc of America Securities dropped to ‘market perform’ from ‘strong buy’ and Morgan Stanley Dean Witter dropped to ‘neutral’ from ‘outperform.’ “Hard times appear to have hit Apple a little sooner than we had expected,” wrote Merrill Lynch’s Steve Fortuna in a research report. “We do not see this as a one-quarter phenomenon for Apple but rather as the beginning of many tough quarters ahead.”

There was more bad news for Apple when it emerged that its new G4 Cube is experiencing ‘streaking’ problems. At first believed to be cracks, the streaks are in fact lines that appear naturally in its clear plastic coating. Although it sounds trifling, it’s a problem for a product whose appeal is based largely on its revolutionary ‘cube’ design.

Follow us to get the most comprehensive technology news in UAE delivered fresh from our social media accounts on Facebook, Twitter, Youtube, and listen to our Weekly Podcast. Click here to sign up for our weekly newsletter on curated technology news in the Middle East and Worldwide.