After two disastrous trading days earlier this month that saw Apple’s stock lose 50 percent of its value, analysts and retailers say the company must quickly take a few positive steps to spur customer interest and rebuild Wall Street’s trust.
Apple cited slower than expected sales in September, particularly from school-related purchases, and disappointing sales of the PowerMac G4 Cube computer as the primary reasons for the earnings shortfall that prompted the stock price crash. However, industry watchers saw a somewhat more systemic problem for Apple but a situation that can be improved.
Michael Flink, VP with Levin Consulting, Beachwood, Ohio, called the stock collapse more an aberration than a serious problem, but he thought a media program designed to attract new customers by exposing the virtues of Apple software and not hardware should be instituted.
“Apple has always been successful on the application side,” Flink said. “They have to advertise to the non-Mac customers what they can do with their computer and not have a TV campaign about a new mouse.”
Attracting new customers should be a high priority. PC Data, Reston, Va., has Apple’s share of the computer market falling steadily. During first-half 2000 the company held about a 10 percent share, which dipped to 6.3 percent in July and reached 7.3 percent in August.
Apple computers have fallen off PC Data’s best-selling computer list, with the company’s best-selling model — the iMacDV special edition in graphite — coming in 18th place in August.
Following through on the much-discussed Apple Store would be a move in the right direction, reported the retail analyst firm ARS, La Jolla, Calif.
Several industry sources said Apple executives were scheduled to hold meetings with them late last week, with the Apple Store concept possibly being officially broached. ARS analyst Shauna Smith said, “A chain of retail stores would likely help Apple improve distribution of its products, a problem that has remained a main weakness of the company since the 1990s, as well as increase overall sales.”
The number of locations opened would have to be carefully controlled to reduce the risk of damaging sales at Mac specialty shops and the national chains selling Apple products, Smith added.
Tony Violanti, sales VP for retailer Computer Town, Salem, N.H., said there are moves Apple could make to quickly rebuild stockholder and consumer faith in the company without investing in advertising or building stores .
“The Best thing Apple could do is announce a [stock] buyback program,” he said. “This would show they feel confident about Apple’s future.”
Violanti also downplayed some Wall Street reports that the installed base of Mac owners has upgraded its equipment and will hold off buying new hardware, and he refuted the rumors that there are problems with cracking in the plastic casing of the new PowerMac G4 Cube.
He did note a slowdown in iMac sales, particularly to the chain’s education customers, but said business-to-business sales were still doing well and store floor sales are healthy.
The computer manufacturer said fourth-quarter earnings would fall short of forecasts by as much as 33 percent, and it expects to report earnings, excluding investment gains, of between 30 cents to 33 cents per diluted share, compared to the 45 cents that had been expected by financial analysts.
Apple said it expects to report revenue of between $1.85 billion and $1.9 billion for the fourth quarter, and because of the slowdown, will reduce growth targets for its next fiscal quarter and year.