Apple may issue profit warning – analyst

Why? Cause it doesn't have a PDA. Go figure...

Expect Apple to issue a profit warning for its current, third fiscal quarter. So says analyst Elyssa Jaffe at little-known (to us, at any rate) IDEAadvisor.

Jaffe's prognosis certainly is very gloomy. She's right to point out that the PC market has yet to recover from the current downturn, and that this could certainly hit Apple's sales, just as it has everyone else's. On this point we agree with her: Apple may run into unexpected problems because the market has dipped further than it, or any of its competitors, anticipated.

However, she goes on to over-egg the pudding with some statements that are just plain silly and call her conclusions into question. First, there's Apple's lack of a "portable Web access device". This, she seems to think, is a very bad sign. Given the problems Palm and Handspring are having selling PDAs right now, we'd argue that now is not the time to be launching into the handheld market. Compaq may be having some success here - though it remains to be seen whether it can be sustained - but that's really no sign that the PDA business is a panacea for troubled PC makers.

It gets better. Jaffe bemoans the fact that Apple has yet to offer much guidance regarding the performance of its two retail stores. Consequently, says Jaffe, "investors are left wondering if the stores that have launched so far have not panned out as expected" (her emphasis - her story is full of <B> tags).

This, too, is addlepated. Apple's stores have been open only a month Just about) so it's far to early to say exactly what impact they will have on Apple's Q3 figures. Whatever you think about Apple, CFO Fred Anderson is smart enough to have taken that into account in his previous guidance.

Jaffe suggests that sales of the iMac line have been weak of late (she presents no figures to back this up) and that Power Mac G4 sales haven't shined either. The reason? No "bells and whistles" upgrades.

Curiously, she ignores the recently launched iBook and the Titanium PowerBook G4. She also fails to mention that world+dog is expecting Apple to announce new iMacs and possibly upgraded G4s early next quarter at Macworld Expo New York. Not that they will help Apple's Q3 sales, however.

Q3 was never going to be an easy one for Apple, and it may yet prove to be more harsh than the company expects. However, there's nothing inherently wrong with Apple's product or retail strategy to suggest - at this early stage, at least - that it's going to be so far off target it needs to cushion the blow with a profit warning. If it does, it won't be for the 'reasons' Jaffe outlines. ®

Related Link

IDEAadvisor: Don’t be Surprised by an Apple Warning

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