Apple Remains Locked in Transition

Apple Computer's (AAPL Quote - Cramer on AAPL - Stock Picks) big move to Intel (INTC Quote - Cramer on INTC - Stock Picks) chips is under way and already seems to be a drag on its operations.

But it will take more than that to scare off the company's long-time bulls.

Sales of the company's computers slowed last quarter and could remain sluggish in the current period, Apple officials cautioned investors and analysts last week while reporting the company's earnings.

Meanwhile, Apple disappointed many enthusiasts and investors earlier in the month by failing to unveil any new products at its Macworld conference.

However, Apple did revamp two computers with Intel chips, possibly indicating that the Intel transition is consuming the lion's share of the company's attention and energy.

The risk, say industry analysts, is that the company will continue to see soft computer sales as it goes through the transition. Further, they say, by focusing so much on the Intel transition, the company risks losing momentum in its computer or iPod music player business -- or falling behind in new markets.

"They need to focus on the transition [to Intel chips], because it's a big deal ... from a technological perspective and, I'm sure, from a supply-chain perspective to make this happen," says Bob O'Donnell, an analyst with market researcher IDC.

The question, he adds, is: "Can Apple maintain the momentum it's gained or do a decent job of treading water as it goes through the transition?"

O'Donnell thinks Apple will do "fine" as it goes through the transition, and many investors have even higher expectations. The transition may cause some short-term troubles for the company -- although some investors hesitate to even admit that much -- but the company's long-term prospects are still bright and will likely be enhanced by the move to Intel, they say.

"I don't underestimate the work that has to be done to make a successful transition," says Tony Ursillo, a buy-side analyst with Loomis Sayles & Co., whose firm is long Apple. "But I'd rather bet for Apple than against Apple."

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