Apple shares slump

Market cap less than half what it was Thursday

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Apple shares dropped further on Friday, as the company's profit warning inspired a whole bunch of previously pro-Apple analysts to downgrade the Mac maker's stock.

On Thursday, after trading hours, Apple announced that it's most recently completed quarter - it ended last Saturday - will see profits down around 33 per cent on company expectations.

The same day, AAPL stock dropped to $53.50 at close of play, then to $29 in private trading after the Apple announcement. On Friday, the stock continued to drop, closing at $25.75.

The upshot: Apple's market capitalisation has been nuked, reaching $8.37 billion, less than half the $17.39 billion it was worth at close of play, Thursday.

Apple wasn't the only victim. Dell, Compaq and Gateway all saw significant falls in their prices, and the Nasdaq composite dropped 106 points. However, the reaction to Apple's financial warning does seem to have been particularly harsh.

As we noted last week, market and industry observers have long been waiting to see signs of failure at Apple. Analysts have praised CEO Steve Jobs' efforts to turn the company around - not all of them his own; his predecessor, Gil Amelio, deserves some credit, too - yet there's always been a feeling that it can't last.

The snag is, that's invariably a self-fulfilling prophecy. At the first sign of trouble, the 'I told you so' merchants start bleating, investors begin to panic and the stock takes a nosedive. That, in turn, makes everyone else think the end is nigh.

Even though it isn't.

Still, at the end of last week, Merrill Lynch; Salomon Smith Barney; Bear, Stearns; Morgan Stanley, Dean Witter; and Paine Webber all downgraded Apple stock from 'buy' to 'neutral'. Most of them have spent much of 2000 lauding Apple's success, commenting on the strength of its cash reserves and inventory management, and praising the company's growth strategy.

Apple bosses are re-examining their plans, and will announce new targets later this month when the company's final Q4 2000 results are issued. ®

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