After earnings, analysts skeptical of Apple execution
By Brad Gibson
gladly puts its
behind it, industry analysts have many questions about Apple’s future plans and their execution — specifically, differentiation of hardware products and the decision to not preinstall Mac OS X on new systems until July.
Andrew Neff, an analyst at
Bear, Stearns & Co. Inc., reiterated his “neutral” rating on Apple in his morning-after report. His rating has remained the same since early October. Neff has also tagged Compaq, Dell, Gateway and Hewlett-Packard with the same rating.
“I’m concerned with a number of factors that put into doubt Apple’s ability to provide long-term revenue and growth,” Neff told MacCentral.
Specifically, Neff is concerned about customers’ acceptance of Apple’s new products and what the company will do related to iMacs in the coming months.
“How will these new products, meaning the new G4 towers and G4 PowerBook, be accepted?” Neff said. “Are they too expensive? Will they entice Windows converts or just be of interest to the current installed base? When will they refresh the iMac and will that be enough to reel in new low-end consumers? These are all unanswered questions I’m concerned about.”
“I’m glad that they made their revised numbers, although they were dismal,” said Joseph Beaulieu, an analyst with
Morningstar.com. “Apple is looking at flat revenues from 2000 to 2001, so I don’t think there’s much to get excited about.”
“I’m skeptical they can turn things around for the entire year,” Beaulieu commented. “They don’t have a product or products that can recapture the excitement of the iMac and what they need right now is a blockbuster product.”
Neff said he is also concerned about Apple’s plan to sell
Mac OS X
in stores starting March 24, but not to preinstall it in computers until July.
“Near-term, we see a significant risk to our June quarter estimates owing to Apple’s decision to launch the new Mac OS X in stores on March 24 and to wait to pre-install until July,” Neff wrote to clients. “(This creates) potential for a stall.”
While Apple may face challenges, a strong balance sheet with more than US$4 billion in cash, cutting-edge industrial design and strong customer loyalty are positive factors for the company, Neff said.
“Having $4.06 billion in cash, which works out to $10.43 per fully diluted share, provides important support for the current stock price (of $18),” Neff commented.
“If you believe Apple will rebound slightly in the March quarter, you should be gobbling up Apple shares because the $4 billion in cash they have is a strong base for strong forward momentum,” Beaulieu said. “If they return to profitability, the cash will help them move the stock price upward, but if they continue to lose and eat up cash, the floor or low-end of the stock will sink. Apple investors need to realize that.”
Beaulieu wrote to customers Thursday that Apple is a risky bet with the potential for a big payoff. “We think the company has a reasonable chance of making good on its promises, but that is not quite a lay-up … the company is far from immune from an economic downturn and deteriorating consumer confidence,” he wrote.
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