Tech stocks were again headed south toward recently set multi-year lows Wednesday, but shareholders of
were smiling at the relatively stable prospects for a cash-rich company that makes things people want.
The PC maker's stock was up nearly 7% -- a rare bright spot in the sector - a day after the company reported a 26% pop in its
Apple, of course, is notoriously conservative in its financial forecasting, typically enabling the company to tear through its own, if not Wall Street's, estimates.
This trend looks set to continue with Apple estimating first-quarter earnings of $1.06 to $1.35 a share on revenue of $9 billion to $10 billion. Analysts, in contrast, had been expecting the company to earn $1.65 a share on revenue of $10.6 billion.
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Apple CEO Steve Jobs refused to make any comments on the state of the economy during a conference call late Tuesday, but the company's results offer plenty of hints as to the
"This is the first time Apple provided a revenue range in almost 2 years (last time was Q2/F07), suggesting unprecedented uncertainty of outlook," wrote RBC analyst Mike Abramsky, in a note released Wednesday. "Apple's outlook in our view highlights its rising challenges, including: a) a deteriorating consumer spending environment; b) premium price points for Macs, some possibly mismatched to tightening budgets, and c) marginRisks."
Abramsky nonetheless maintained his sector perform rating on Apple, but reduced his target to $125 from $140, citing a lower earnings outlook and increased risks.
Other signs emerged of the tough spending climate in Apple's fourth-quarter results, notably in the company's Mac sales, which represent more than half its total revenue.
Apple shipped 2.6 million Macs in the fourth quarter, a massive hike on the prior year, although even this figure is indicative of the economic slowdown, according to
Technology Business Research (TBR)
analyst Ezra Gottheil.
"Mac unit sales were up 21% year-to-year, a number most companies would be proud of, but it was the smallest growth Apple has posted since 2Q06, when the company transitioned to the
platform," he wrote in a note Wednesday.
Analysts had expected Apple to ship 2.7 million Macs during the fourth quarter, although the company's figures were affected by lower sales to schools and the recent introduction of new MacBooks, which led to some customers delaying their buying decisions.
With $24.5 billion in cash, however, Apple is still better positioned than most companies to weather the economic storm, and Jobs went out of his way to underline the company's strong position Tuesday.
"We have almost $25 billion in the bank, and zero debt, that gives us tremendous stability," he said, adding that the downturn could present "tremendous opportunities" for a company in Apple's position.
The executive dodged a question from Sanford Bernstein analyst Toni Sacconaghi, who asked whether this meant that Apple was eyeing potential acquisitions.
"I meant exactly what I said, I think there's significant opportunity," he said, without confirming whether this meant M&A.
For the first time, Apple also discussed how the company would have performed if it recognized its revenue from iPhones at the time of sale. Jobs explained that this would have pushed Apple's fourth-quarter revenue up to $11.7 billion, an 88% increase on the same period last year.
Jobs also reiterated the company's decision to keep its low-end notebook prices higher than competitors such as
, a move which he claims will help protect Apple's margins.
"There are some customers which we choose not to serve," he said, in response to an analyst's question. "We've seen great success by focusing on certain segments of the market and not trying to be everything to everybody."
TBR analyst Gottheil warns, however, that this strategy represents something of a double-edged sword, particularly in a tough economy.
"Because Apple specializes in premium products, TBR believes the company will be affected more than competitors by a severe sustained economic downturn," he wrote. "Nevertheless, we believe the company will continue to be profitable, and will successfully weather difficult conditions."