Apple's Fall Shaking Up the PC Tree

That story about the turtlenecked marketing genius who brought an upstart and innovative company back from the brink of extinction -- you won't be hearing that again for a while.

Not after Thursday night, when Apple (AAPL Quote - Cramer on AAPL - Stock Picks) warned after the bell that fiscal fourth-quarter earnings would fall "substantially" short of expectations. The company said it expects to earn 30 cents to 33 cents per share, leaving it well short of the 45-cent First Call/Thomson Financial consensus. Apple forecast quarterly revenue of $1.85 billion to $1.9 billion, up from $1.83 billion in the third quarter.

That indicates extremely modest sequential growth, even as shareholders have been betting demand will rebound in the second half of this year as Apple rolled out the new product line it unveiled this summer at MacWorld.

Now investors have to consider the possibility that the strong boost the company got from the introduction of the colorful iMac in 1998 may not be sustainable. For unlike Intel (INTC Quote - Cramer on INTC - Stock Picks), Apple didn't blame the euro, saying instead that sales were weak across all geographies. It noted slow sales of its new G4 Cube and a sluggish education market, which has historically been a strong point for Apple.

In a press release, CEO Steve Jobs said: "Though this slowdown is disappointing, we have so many wonderful new products and programs in the pipeline, including Mac OS X early next year, and remain positive about our future." But investors just don't care. Apple last traded at $29.13 on Island, down 46% from New York trading close.

'Wonderful' The iMac brought Apple back from the depths. What can the new products do?

"It's a shocking preannouncement because it's so bad," says Jeff Matthews, president of Connecticut-based hedge fund Ram Partners, which, quite luckily, is short Apple. "But it's not shocking in the context of Eastman Kodak (EK Quote - Cramer on EK - Stock Picks), Intel and Dupont (DD Quote - Cramer on DD - Stock Picks). The most interesting thing Apple said was that there was a sudden slowdown in all geographies all over the world. That's exactly what Eastman Kodak said the other day. I think we're having a slowdown worldwide right now."

Fears about weakening worldwide demand for PCs, sparked by downgrades of big chipmakers and deepened by Intel's revenue shortfall, conspired to take about 20% off Apple stock this month. Interestingly, the shares rebounded Thursday, rising $4.56, or 9.3%, to $53.50 ahead of Apple's warning.

It's not clear how investors will extrapolate Thursday's news to the rest of the sector. Because Apple's machines use a proprietary operating system and proprietary microprocessors, Wall Street has resisted treating the company as a bellwether for the other boxmakers, whose products run on Microsoft's Windows and chips made by Intel or AMD.

Apple's competitors have each offered different assessments of demand since Intel's warning. But Dell (DELL Quote - Cramer on DELL - Stock Picks), Gateway (GTW Quote - Cramer on GTW - Stock Picks) and Hewlett-Packard (HWP Quote - Cramer on HWP - Stock Picks) have each said they were on track to meet forecasts for their current quarters, while Compaq (CPQ Quote - Cramer on CPQ - Stock Picks) has said that Europe was tracking within expectations.

Apple hasn't been saying any of those things, mind you.