Apple Says Product Shortage Will Hurt Quarterly Earnings : Computers: Company unable to keep up with consumer demand. It also is recalling new PC because of fire concern.
In a surprisingly negative announcement that is expected to help push many technology shares lower today, Apple Computer said late Thursday that its fiscal fourth-quarter earnings would be “significantly below” financial analysts’ predictions because of product shortages.
The Cupertino-based computer maker also said it was halting shipments of its new PowerBook 5300 portable computer because of a battery problem that can cause the machines to catch fire.
Apple thus became the third big computer manufacturer this week to lower expectations for the July-to-September quarter. AST Research Inc. shook up its top management in the wake of its financial trouble and IBM said it was delaying a popular new mainframe computer because a component supplier couldn’t keep up with demand.
Meanwhile, database software giant Oracle Corp. on Thursday also reported disappointing earnings, fueling analysts’ fears that the entire technology stocks group--which has been driving the market to new highs for many months--is heading for a tailspin.
Apple’s announcement came after the market’s close on a day that saw Apple’s stock tumble $2.375 to $40, its lowest level since May. In after-hours activity, Apple dropped to $37. Oracle lost $1.125 to close at $44.875, and fell as low as $39.75 after hours.
Wall Street already had begun to lower earnings expectations on Apple even before the announcement. The company has been struggling for a year to keep up with demand for its products--causing market-share losses that Apple can ill afford--and the problem evidently has not been solved.
“They are going to miss the quarter because they can’t seem to build the right products,” said analyst Bruce Lupatkin of Hambrecht & Quist.
In a statement, the company said demand for its Macintosh personal computers remains strong and that production will increase. But Apple predicted that shipments, revenue and gross margins will be hurt by component availability, product delays and pricing pressures on its older products.
Apple spokeswoman Lisa Byrne said the company expects to earn less than 82 cents per share this quarter.
Like many other computer makers, Apple has been hurt by a shortage of parts. But the company also has underestimated demand for the Power Macintosh, a new line intended to compete against PCs using Intel Corp. chips and Microsoft Corp. software. That miscalculation is considered especially damaging at this juncture, since Apple is struggling just to stay even in the face of Microsoft’s Windows 95 marketing blitz.
“There just aren’t many Apple computers on the store shelves,” said Michael Murphy, editor of the California Technology Stock Letter.
“The issue is whether the customers who are looking for Apples are going to be willing to wait for a month, or will they shift to Windows,” said analyst Vadim Zlotnikov of Sanford Bernstein & Co., who cut his fourth-quarter estimate to $1.00 a share from $1.10.
On the PowerBook recall, Apple said the lithium ion batteries caught fire in two portables being used by employees. As a result, the company recalled the 1,000 machines shipped since the product’s Aug. 28 introduction.
Apple said it expects to resume shipping the computer with traditional nickel metal hydride batteries as early as next week.
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Tech Trouble
Key technology stocks slumped Thursday and the group could get slammed harder today.
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Thurs. Stock close Change Integrated Device $52.25 -$6.00 Cypress Semicon. 39.88 -5.88 Alliance Semicon. 38.50 -5.50 Cirrus Logic 56.00 -3.13 Apple Computer 40.00 -2.38 Adobe Systems 48.00 -2.13 Dell Computer 83.63 -2.13 Microsoft Corp. 94.88 -1.25 IBM Corp. 93.38 -1.25 Intel Corp. 63.69 -1.19 Oracle Corp. 44.88 -1.13
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