Apple's stock price fell by 51 per cent on Thursday, after the company’s announcement that its third-quarter profits would be lower than expected.

The company’s stock closed at $25.75, down from $53.5, a fall of $27.75.

132 million share exchanges were made on Thursday, although some shares may have been sold more than once.

Poor sales Apple blamed the lower-than-expected profits on poor sales, especially in its traditionally strong education market, and low demand for its PowerMac G4 Cube.

The company said that its earnings per share would be between 30 and 33 cents, as opposed to the previously forecast 45 cents per share.

Analysts moved quickly. Bear, Stearns, Morgan Stanley Dean Witter, and Merrill Lynch all downgraded Apple's stock from "buy" to "neutral". On after-hours trading on the Nasdaq, Apple's share price tumbled.

Brave face Though Apple's chief executive officer Steve Jobs described the announcement as merely a "speed bump", it seems that some bankers and some of Apple's loyal-customer base doesn't see this announcement as minor.

Apple users have vented their frustrations on the message boards at Mac news site MacNN, and have blamed the downturn on everything from the prices of Apple's computers to the speed of its processors.

One user, calling himself eVO, said: "The Cube is too expensive, and shouldn’t be selling for more than $1,399 [it retails at $1,799]. It's almost embarrassing that Apple doesn't have a complete system for under $2,000 that isn't an iMac, and they haven't for years."

AIM alliance Other users were quick to blame Motorola, who, along with IBM, manufactures the PowerPC chip.

Shadowself, a MacNN user, said: "Point the finger directly at Motorola. When Intel is announcing that they’ll ship 1.5GHz Pentium 4s next month and Motorola is still stuck at 500MHz for the foreseeable future ... it makes Macs a very, very hard sell."

Tim Bajarin, the president of Creative Strategies, a technology consulting firm, disagrees about the need for faster computers. Internet access, not processor speed, drives computer sales, he said.

Misjudged According to Bajarin, Apple's actual problem is that it misjudged consumer demand on two fronts: the PowerMac G4 Cube and the iMac. The Cube is too expensive and is stuck in between market segments, he said. Apple aimed the computer at the mid-range sector, that is, users who want a machine that offers more power and expandability than the iMac. But those customers are better served by the PowerMac G4 tower, not the Cube, he said.

Also, Apple's consumer desktop, the iMac, is now three years old and hasn't changed substantially since its introduction, Bajarin said. Changing the colours of the case is not enough, he said. Apple will have to offer something equally radical as the iMac was at its introduction to entice new customers, he added.

Roger Kay, research director at International Data Corp (IDC), agrees, calling the iMac "long in the tooth".

Oil Bajarin and Kay note that Apple's troubles may be related to a factor the company has no control over - the price of oil.

Both analysts blame the current and possible future upturns in oil and gas prices for keeping some consumers from buying new PCs. When the price of oil starts to rise, people begin to feel pinched and stop buying, Kay said.

But Kay is optimistic about Apple's future, provided that Steve Jobs stays interested and active in the company. Apple's future "depends on Steve" because Jobs "retains the vision" needed for Apple to create its next great product.

"There's no question that you have to look at Apple with greater concern" than at the beginning of the week, said Bajarin, who remains confident that the company has the ability to fix its problems over the next six months.