Apple lost 15 per cent of its market capital on yesterday’s trading, closing $3.03 dollars down at $17.12.
The fall follows the company’s profit-warning announcement after market-close on Tuesday. Investors showed their concern with their dollars, pulling them out of the tech sector.
It isn’t just Apple that’s to blame. US reports show declining consumer confidence. This has combined with continued malaise in other sectors of the economy.
Downturn Recent profit warnings from AMD, Palm, Hewlett-Packard, and several other high-profile companies in the tech sector aren’t helping the situation; the much hoped-for recovery in the latter half of 2002 has not transpired. Analysts now warn that movement may not occur until next year.
The deteriorating Middle East situation has also taken its toll, as has news of a DOJ investigation into memory manufacturers. Looking for stable, but low-yielding investments, the gold market rose yesterday, as did Government Bonds in many territories.
“No one can escape this downturn,” said David Bailey, a technology analyst at Gerard Klauer Mattison & Co. “Demand remains extremely weak almost across the board.”
Wall Street’s reaction to Apple’s news was immediate. Analysts Merrill Lynch; Credit Suisse First Boston; First Albany; and AG Edwards all reduced their rating on the company’s stock to ‘Hold’. Needham & Co bucked this trend, offering a ‘Buy’ rating, and predicting upgraded Power Macs at Macworld Expo New York.
Reiterating their 'Hold' assessment, Credit Suisse First Boston analysts warned: “Apple’s exposure to the consumer and educational markets is compounded by its professional exposure to advertising and publishing, two other market segments under economic pressure. We do not believe upcoming product launches will be enough to offset these negative end-market trends.” The brokers issued a new price target of $20.
Reaction on all markets for most stock-types was bad: Tokyo, Hong Kong, Frankfurt, Paris, and London stock markets all declined on yesterday’s trade. US markets also suffered – Nasdaq (down 2.9 per cent), the Dow Jones (down 1.49 per cent) and the Standard and Poor Index (down 1.65 per cent).
The FTSE is showing minor improvement this morning. Stocks climbed £4.40 as of 9.49 am, but the trend reversed – the FTSE 100 Index was down £60.1 at 12.23pm. In Tokyo the Nikkei index gained 136 points to close at 10,612.98 today
IFalls Apple’s partners also suffered in yesterday’s trading:
Macromedia closed down 8.98 per cent at $13.98, losing $1.38.
Adobe lost ten per cent, down $3.01 to close at $27.08.
Corel lost 6.35 per cent, closing at $0.899, a loss of $0.061.
Microsoft lost 2.91 per cent of its market cap ($1.63), to close at $54.36.
Innovation Apple CEO Steve Jobs has already promised the Apple-faithful that his company will innovate its way out of the recession. Indeed, though the company is nowhere near the heights it achieved before 2000’s stock split, the company is engaged in noteworthy strategies today that should help it raise market share – even in an ailing economy.
The company has 30 Apple-only retail outlets in the US, with 20 more planned by the end of the year. The company has also begun its biggest advertising campaign since “Think Different” – “Switch.” Mac OS X is due for major improvement with the release of Jaguar later this summer. Apple has broken the GHz barrier, and its products are winning plaudits both for their design and technological superiority.
In terms of sales, Apple is maintaining its aggressive attempts to boost sales in the education market. Macs are still the platform of choice in the creative markets, and the company is continuing to explore new market opportunities in the developing digital-video and post-production, and Sci-Tech markets. The company also has huge resources of cash on-hand.