As financial analysts converge on Cupertino, Calif. for today’s
Apple analyst meeting, many are expecting Steve Jobs and company to focus on their strategy for returning to profitability, a goal Apple hopes to reach this quarter.
A number of analysts are cautiously optimistic the company can pull itself out of its fiscal first quarter doldrums and post a slight profit in the second-quarter. Apple lost US$247 million in the fiscal first-quarter.
“The goals Apple is setting for this quarter are attainable,” analyst Richard Gardner of Salomon Smith Barney Inc. told MacCentral. “It won’t be a great quarter, but the second quarter never is good for any PC maker.”
“I think the goal for this quarter is to clear excess inventory, ship the rest of Apple’s high-end Power Mac G4 systems and G4 PowerBooks and hopefully focus on new consumer iMac solutions,” commented Andrew Neff, an analyst with Bear, Stearns & Co. Inc. “Apple needs to make the past history, get through what is going to be a slow quarter and look to the future.”
Currently, 13, or 72 percent, of Wall Street professionals following Apple consider its stock a “Hold.” Five consider it a “Buy/Hold” recommendation.
Apple’s fiscal second quarter profits are estimated to be at $0.03 per share on revenues of approximately $1.4 billion. This reflects a rise of 50 percent from last month’s estimate of $0.02 per share, but still indicates earnings will fall compared to the prior year quarter of $0.64 by 95.31 percent.
Concern over current inventory and demand
One of the biggest questions analysts will be seeking an answer to is how will Apple clear the remaining inventory of older Macs and convince vendors to take new stock.
“Apple has the same problem other PC makers have and that is clearing excess inventory,” said Neff. “They say they are down to about 5.5 weeks of inventory and that’s good, but what about the inventory that still remains on dealer shelves? What are they going to do, if anything, to help move that inventory? Vendors won’t want to take on a lot of new stock of new Macs if they can’t sell the old stuff.”
Analysts are also seeking answers to when the 667 and 733MHz Power Mac G4 models and G4 PowerBooks will be available in plentiful supply and are concerned that will have some impact on second quarter earnings if they are delayed much longer.
“They have backed up G4 PowerBook availability somewhat and that has to be factored in,” said Don Young of Paine Webber Inc. “I think Apple has factored that and G4 tower delays somewhat, but to what extent I don’t know.”
At present, national Mac distributors are quoting the end of March for availability of 667 and 733MHz G4 tower systems to vendors. If that holds true, those systems would have no positive affect on fiscal second quarter sales and earnings. When informed of this news, Young said, “That’s not good. That is of concern for this quarter for sure, but I think that has been factored in by Apple in their estimates.”
Hints of other new products coming?
No analyst thinks Apple will give news or even major hints of new products to come in the next 60 days, but there is hope news of certain features announced in new Macs earlier this month — such as CD-Recordable or CD-ReWritable drives in a new G4 Cube or iMac — might be mentioned later today.
“If Apple is going to make a case of new customers as well as upgrades to buy an iMac or Cube, they have to incorporate some of the features they showed in high-end systems earlier this month,” Gardner said.
So agreed Charles Smulders, an industry product analyst at market research firm Dataquest. “If they are going to have people take advantage of iTunes, they have to give them the CD-RW drive to do it. I think it’s pretty much a foregone conclusion they will do this,” Smulders said.
Speculation is Apple will announce new, refreshed iMacs at next month’s
Macworld Expo convention in Tokyo beginning February 22.
The analyst meeting will take place at Apple’s Town Hall Center in Cupertino, Calif. beginning at 4:30 PM EST and end at approximately 8:30 PM EST. Members of the media and the public can access a live audio stream of the event using QuickTime 4 or newer through
Apple’s Web site.