Lower forecast for Q2

Apple's stock was down today in after-hours trading after the company offered a second-quarter forecast that was not as bright as investors hoped. Apple's forecast of 42 cents on revenue of $4.3 billion, which was short of analysts' average expectations of 51 cents per share on revenue of $4.83 billion, according to Reuters. The company said that the forecast, which represents a revenue increase of nearly 33 percent and double digit profit increase, is based on the shorter 13-week quarter, combined with a greater-than-normal seasonal decline in overall business--due in part to its large music sales in the December quarter--and an expected sales slow down in its transition to new Intel-based Macs. The company also said it may not meet demand for its forthcoming Intel-based MacBook Pro, which is due to ship in February.

"Their guidance being overly conservative for next quarter, that's what's causing the most chaos in the shares today," said Jim Grossman, portfolio manager at the Thrivent Technology Fund. "People want a little more explanation of why they're giving such conservative guidance."

Apple's success, focused much on the iPod and iTunes Music Store, may have distracted investors from its core business: the Mac, which is in the middle of a large-scale shift to new Intel processors and faces challenges.

"Historically the Mac has been the primary revenue generator," said Nittin Gupta, an analyst with the Yankee Group. "At this rate of growth, the Mac is not going to be their primary revenue driver. If they become too dependent on iPods and digital audio players, that's a risk over the long term. It's going to be hard to maintain those iPod shipment numbers."

Apple shares fell $2.22, or 2.6 percent, to close at $82.49, following disappointing results by Intel (and Yahoo!) on Tuesday. In after-hours trading, Apple stock fell below $78 before rebounding to $79.71, a drop of 3 percent since its close for the day.

by MacNN Staff