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September 29, 2008, 10:49 am

Apple bruised in downgrades

By Scott Moritz

Apple (AAPL) got hit with a pair of downgrades Monday as analysts see a weaker consumer taking a big bite out of the computer-maker’s growth rate.

RBC and Morgan Stanley analysts slapped Apple with neutral ratings, down from buy, on concerns that the slumping economy will put a chill on sales of Mac notebooks and desktop computers.

Citing a IQ/Changewave survey, RBC noted that 40% of consumers questioned said they “plan on spending less on electronics in the next 90 days,” RBC analyst Mike Abramsky wrote in the note. This is the weakest outlook ever measured in these surveys, Abramsky wrote.

Apple shares fell 16% in morning trading Monday in the wake of the reports, as investors get a sobering view of how popular consumer devices can lose momentum in a faltering economy.

The growing credit crisis has helped deflate consumer confidence and force delays in purchases of items like new computers and flat-screen TVs. The problem for Apple, writes Kathryn Huberty in a downgrade of Apple to neutral Monday, is that not only is PC sales growth slowing but the one area shrinking less is the under-$1,000 price range where Apple is absent.

Add the slowdown in PC sales to the higher costs of iPhone production, and Huberty says there will be a dramatic drop in Apple’s profit growth. Huberty cut her Apple earnings growth projection for the year to 6%, well below the 9% analysts’ consensus average.

Apple is not recession proof, RBC’s Abramsky writes.

Not surprisingly, investors have taken flight from stocks in some of the stronger players as the market jitters spread across nearly all sectors. Apple shares are down 35% and smartphone rival Research in Motion (RIMM) is down 47% in the past month.

RIM’s disappointing outlook Thursday confirmed that the once hot smartphone segment is cooling just as the larger mobile phone market grinds into slow gear, not just in the U.S., but globally as Nokia (NOK) recently pointed out.

This is too hilarious, Mac Fanboys/Elitists will never change. The second some negativity concerning the company is publicly voice the trolls come out from hiding to defend their pricey systems that they already invested so much money in they would freak out to realize that they’re not actually getting better machines.

Macs have been the bottom scum of the PC world for years, they have never had a fighting chance until recently and it’s amazing at how many jaded Mac users will shame their pride by posting such ludicrous bullcrap suggesting that their systems run better than PCs. You guys keep burning your money on computers that someone could buy a decent used car on while the smart computer users build their own PCS for 1/2 the price and 2x the power

Mac = The ignorant persons computer
Mac = A computer for idiots.

Apparently the brain child that conceived the above statement has no knowledge of knowing the real power of using a REAL computer and not some sort of PC knock off or cheap imitation thereof. MACS are for PROFESSIONALS!!! Not the lame home body that hasn’t got the talent to open a page on the internet, no less being able to find it.
PC=Pretty Crappy
PC=Lame asses who use a computer to play games.

Posted By RJW, Chicago : October 6, 2008 6:20 pm

A few questions:

Has anyone mentioned Apple’s $20 Billion in cash reserves? I doubt if they’ll be going to Microsoft for a bailout, like Tom in NJ says.

Did anyone looked to see what these analysts track records are? How accurate were they in the last four quarters in predicting revenues, profits and shipments?

Does anyone think that the deferred iPhone revenue that Apple is still able to book will cushion softness in the PC market?

Does anyone think that Apple is just sitting there resting on its laurels without any new products and strategies to grow the company?

Does anyone think that 40 percent off the high will look like a buying opportunity a year from now?

Does anyone think that Ms. Melon’s regerence to a voracious worm eating Apple’s pancreas is funny? Or just plain creepy?

Posted By BruceKap, Berkeley CA : September 30, 2008 11:43 am

The elitist attitude from apple fanboys is almost disgusting. Can you just admit there is a huge market apple chooses not to sell in be it for “poor” people or not? The same logic would be why sell other makes of cars as X company is the best so why bother.

I’m also sick of the virus comment, it’s been years since there was a virus that impacted people 95% of all issues are related to spyware/trojan type which are browser based and last I saw Apple is pumping out as many security fixes as anyone.

No matter how many ipods Apple sells they will never have a large market share due to their cost which no matter how you slice the other the cost is only up front drivel. Again if I bought a luxury car I could expect less issues vs. a cheaper car but there are a whole lot of people that can’t afford the luxury car and seeing the market reaction they expect there will be less people affording Apple and things deemed non-essential for the next few months.

Posted By Frank Smith, New York, NY : September 30, 2008 6:30 am

This is too hilarious, Mac Fanboys/Elitists will never change. The second some negativity concerning the company is publicly voice the trolls come out from hiding to defend their pricey systems that they already invested so much money in they would freak out to realize that they’re not actually getting better machines.

Macs have been the bottom scum of the PC world for years, they have never had a fighting chance until recently and it’s amazing at how many jaded Mac users will shame their pride by posting such ludicrous bullcrap suggesting that their systems run better than PCs. You guys keep burning your money on computers that someone could buy a decent used car on while the smart computer users build their own PCS for 1/2 the price and 2x the power

Mac = The ignorant persons computer

Posted By Jon, Phoenix, AZ : September 30, 2008 3:43 am

This is too hilarious, Mac Fanboys/Elitists will never change. The second some negativity concerning the company is publicly voice the trolls come out from hiding to defend their pricey systems that they already invested so much money in they would freak out to realize that they’re not actually getting better machines.

Macs have been the bottom scum of the PC world for years, they have never had a fighting chance until recently and it’s amazing at how many jaded Mac users will shame their pride by posting such ludicrous bullcrap suggesting that their systems run better than PCs. You guys keep burning your money on computers that someone could buy a decent used car on while the smart computer users build their own PCS for 1/2 the price and 2x the power

Mac = The ignorant persons computer
Mac = A computer for idiots.

Posted By Anonymous : September 30, 2008 3:43 am

The one thing that makes Apple strong is the one thing that makes Apple weak. Sony betamax was better than VHS in almost every way, but Sony didn’t allow others to make beta. Not till it was too late, when they licensed it to Toshiba and Sanyo. JVC who owned the patent on VHS licenseed it everywhere. The result? VHS is everywhere and beta has a very very small market. Apple’s problem is Apple itself.

Probably the best computer ever designed (for its time certainly) was the Commodore Amiga, but it didn’t matter that it was better than either Apple or IBM clones at the time. What mattered was, it had less support.

When it comes to computers, support (read open architecture) is everything.

Posted By Steve L, Moonah, Tasmania : September 30, 2008 3:20 am

This is usual bad reporting and facts.

Everytime Apple puts out conservative forecasts and then blows them out of the water. How many companies can you say are profitable…not many and Apple is the cream of the crop.

Recession or not…people will buy things that make them happy. Ipods, Itunes music are 2 of those things. I know people that didn’t have much money but saved for an Ipod. As for the PC market, Apple has a ton to gain in it in %.

Stupid reporting from analysts that couldnt even predict this financial crisis like I did 5 years ago.

Posted By James, Arlington, VA : September 30, 2008 1:01 am

I agree with most of the pro-Apple comments. My comment is: BUY THE STOCK! It’s on sale and it’s rumored that the upcoming MacBook will break the $1,000 price point. I’m buying more appl tomorrow. The new MacBooks are supposed to be released Oct. 14 according to the buzz. We’ll see.

Posted By JK, Ft. Lauderdale, FL : September 30, 2008 12:46 am

Apple will continue to thrive, because their computers are that good. I switched from PC to Mac three years ago, and I’ve never looked back….best business move I ever made, and now I own three Mac’s, and an iphone. I have no worries about their market performance.

Posted By Chris, Seattle WA : September 30, 2008 12:31 am

I’ve been reading quite a bit about this “slow down due to Consumer confidence” Life Ionizers had the Internet Sales today ever; Consumer confidence in my experience and according to history is really a change in consumer interest. History shows us that in Low Market periods (including the great depression) spending rose in many areas (entertainment, health, advertising etc). So the Apple drop, the Google drop and the Amazon drop are all fleeting figments of panic, and just like a few weeks ago, Google, Apple and Amazon will all climb back to their original positions.

So while this panic is going on, I’m going to drink some alkaline water, download some music to my iPhone and go see a movie, just like most of America is doing tonight.

Posted By Glenn, Escondido, CA : September 30, 2008 12:17 am

I will be so happy if Morgan Stanley’s credit rating is downgraded by a someone who woke on the wrong side of bed one fine morning.

Posted By Cannot, CA : September 30, 2008 12:15 am

Note to Scott: The Mac mini is less than $1000. However, it comes will all the software that should make it worth well OVER $1,000. It doesn’t come with something every PC gets: viruses.

As a former journalist, I’d like to see more in this article. What is the average income for a Mac buyer vs. PC buyer and the type of job both bring to the market? Most of my friends are upwardly mobile, well-educated and are positioned in education or the arts. Most of my PC friends bought PC because it was all they could afford.

That information would be useful before making stock decisions. The poor by PCs. For those of you who aren’t poor, this might be the time for your businesses to rethink their computer. Macs save money.

For years, we on the Mac side are used to bad news and people counting us out. Then something happens. The next product comes out and we have to have it.

Posted By Tim – Anaheim, California : September 29, 2008 11:32 pm

If Apple will be requiring another bailout from Microsoft next year, they might want to scale back on the negative, comparative advertising.

Posted By Tom, Summit, NJ : September 29, 2008 9:54 pm

Wow, it never ceases to amaze me how completely STUPID some people are. Morgan Stanley is one of the survivors, for now. Morgan Stanley has not been bailed out.
I have an idea, why don’t you stick to your ipod news and stay away from finances.

Posted By Stupidity Hate-er San Diego, CA : September 29, 2008 7:19 pm

So little time, so much idiocy.

Apple prefers not to compete in the sub-$500 loss leader market. It makes no sense to Apple (or its investors) to sell 10 million computers and lose money on each one. Given the option to be the biggest computer company or the most profitable, Apple prefers ‘most profitable’.

Apple commands 66% of the very profitable over-$1000 market (see http://news.cnet.com/8301-13579_3-9947501-37.html) and earns approximately 30% profit on each and every Mac sold.

For the last time, Apple computer are not overpriced! In fact, in many instances, they cost less then comparatively configured computers manufactured by other major computer makers. (see http://systemshootouts.org)

Unlike companies like Dell and Acer, Apple has a variety of revenue streams – Macs, iPods, iPhones, iTunes Music Store (the #1 music retailer in the country), the new iApp store (over $100 million income in under 60 days) – and because of that Apple is poised to have the biggest quarter in the company’s history.

While the PC industry is shrinking, Apple is thriving – up 36% year-over-year. Over twice the industry.

Posted By Dru, Dallas,TX : September 29, 2008 6:37 pm

haha a comment made buy morgan stanley! a company that was rescue last week from going down…..

Posted By Anonymous : September 29, 2008 6:04 pm

Remember the glass houses on the old carnival midways? Mirrors made it impossible to make logical choices about directions and location of the exits. Articles such as this offer similar perspectives as evidenced by responses that drag in road kill comparisons of Mac versus PC.

The truth is, we’ve become so focused on stock prices and performance that we’ve lost sight of true measures of success–Did the company make money? In this case, Apple has been sporting a gross margin well in excess of 34%. By comparison, Dell recently reported a margin of slightly more than 17%. (Remember oil company executives were skewered by Congress when their margins peaked at 8-12%.)

In this report, there was no mention of eroding profitability. Instead, profit growth won’t achieve the 9% level anticipated. Sad Apple will have to settle for only 6%. How may wage earning readers anticipate a 6% pay raise this year, in the midst of an economic crisis that may be just beginning?

Posted By Paddy Reagan, Naples, FL : September 29, 2008 5:41 pm

…fools…A great product may slow down during a certain period. However it will always come back with new options. Does anyone know what Apple’s margins are? Neither do I, and I can only imagine. time will tell..

Posted By Tony, Highland Village, Texas : September 29, 2008 5:28 pm

Apple’s products are well engineered and beautiful pieces of decor, as well as fast machines. Everyone forgets that the Mac OS X, runs faster on slower hardware than any PC using windows. I have 5 PC’s, 2 Imac’s and 3 laptops, and the IMac completely kills the PC’s on most operations. The Mac’s are not perfect, but they are dang close, I would love to see Mac’s OS pushed to use generic hardware, and the OS sold stand alone, just like Windows, then Apple would have market share. That being said, the reason Mac OS X runs so well, is Apple controls every aspect, hardware and software.

Posted By Charles, Hickory NC : September 29, 2008 4:54 pm

maybe the “smart?” analysts should actually visit an apple store sometime. I’ve never been in one that wasn’t packed to the gills with long lines at the tills. computers are no longer luxury items for most of us.

Posted By scott, Tampa, FL : September 29, 2008 4:48 pm

Why can’t Wall Street ever get it right with Apple? They’re always either too low or too high on them.

Posted By Tony – Boston, MA : September 29, 2008 3:56 pm

This downgrade from Morgan Stanley should not count as they should not have been in business by today. They are hanging on waiting for the bailout to save their behinds. Their management was totally incompetant and still gets paid big bucks. They deserve failure.

Posted By rick, Plantation FL : September 29, 2008 3:46 pm

>>Aapl stock buyer – Washington DC

Welcome to the free market and free speech. The value of something is set by the last transaction price, not what you or I THINK.

Maybe you prefer to live in a communist country, where the government will set the price so you will be happy.

Your trading plan and money management should be taking care of you in these situations.

Be fearful when others are greedy, be greedy when others are fearful.

Maybe it’s time to get greedy soon???

Posted By Getting Greedy,Abq,NM : September 29, 2008 3:40 pm

apple mini is the only one product that is under $1000. true.
however, apple are not selling tons of those.
All base model imac and ibook are over 1000$.
apple mini is very under power compare to dell/hp’s macine in same price range is way worse.
599 does not evern include monitors .
1GB ram and 80G harddrive and 1 dvd-rom and no tv card, no monitor.
All other competitor’s base model that is 399, 499 has tv card , 2G ram and much higher harddrive and also in mini
case also.
Problem is majority of apple product are way overprice and in the price range that people no longer can afford.
It’s a luxry item…designer item and all…but you won’t go for designer handbags when you are broke.

Posted By andy,tx : September 29, 2008 3:37 pm

And in what world are you living that you can find a new laptop by Apple for $599?

Posted By Debbi, Alex, VA : September 29, 2008 3:26 pm

This is a correction that looks like a buying opertunity. My bet is that there will be an October announcement that will slow the stock drop.

Posted By Ffanboy : September 29, 2008 3:06 pm

Apple fanboys are too funny.

Posted By NEO, NY, NY : September 29, 2008 3:05 pm

“PC sales growth slowing but the one area shrinking less is the under-$1,000 price range where Apple is absent”

Uh, hellooo – Apple has computers starting at $599, a full 40% less than $1000.

Just thought that the facts are important.

Posted By Jay Kooper, Denver, CO : September 29, 2008 2:09 pm

A voracious worm gnaws away at Apple’s pancreas in a final hit Job.

Posted By Ms. Melons, Apple Valley, CA : September 29, 2008 1:47 pm

It will go below $100… and perhaps hit $70 and even go lower.
AAPL is going down baby, way down. A buying opportunity?
It could make sense, but I’ll a couple of years before it goes up.
This is not about the fundamentals of Apple… just the economy.

Posted By AK, Ottawa, ON, Canada : September 29, 2008 1:13 pm

Thank you, lemmings! You’re making it possible for me to invest in Apple at fire sale prices!

This stock should be at $250/share. The idiots who are saying the profit growth is submarining frankly don’t know what they’re talking about. We’re talking about a company that has less than 10% market share, folks. Frankly, I see this as an incredible opportunity for Apple to go to 15% market share, as the smart buyers purchase computers that are ahead of the curve. And don’t even get me started on the future of the iPhone and the iPod Touch!

The only reason I’m waiting to buy is that the lemmings are still throwing themselves over the cliff.

Posted By Sacto Joe : September 29, 2008 1:01 pm

Factual Error:

” one area shrinking less is the under-$1,000 price range where Apple is absent.”

Apple sells the Mac Mini starting at $599 with a Core 2 Duo, and may be announcing an update/redo of it in mid-October.

Posted By Shaun, Eureka, CA : September 29, 2008 12:16 pm

I dunno about the downgrade for reasons of the ‘public’ not buying. We just spent about $1600 on a new Mac computer and I see from an email that a friend of mine has just bought a new Mac too. I shifted from PC to a Mac about 8 months ago. If Apple had not tied the iPhone to AT&T I would have one of them too.

Posted By JTTyler, Washington DC : September 29, 2008 12:13 pm

You mention that Apple is missing in the sub $1000 market…I assume the writer forgot about the MAC-mini which the last time I checked sold in the $700 price range.

Posted By Jay Stephens, Fort Lauderdale FL : September 29, 2008 11:45 am

Abramsky should be thrown in jail with the other Abramowitz for slapping aapl. Birds of a feather flock together. How dare Abramsky is trying to destroy apple and the US economy. Wake up America and clean up this poison…

Posted By Angry, Clifton, New jersey : September 29, 2008 11:36 am

I cannot believe that the value of a stock is so influenced by the comment of a Morgan Stanley/RBC analyst.

How do we know that these analysts are not part of a bigger game?
How can an article of that kind drop the stock value 16%?

How can the goverment allow something like this?

IQ/Changewave has a survey, people states that they will spend 40% less in electronics.

The market crashes.

HOW DID THEY HELP THE ECONOMY?

People read their survey, and they fall in the “word of mouth” system that brought us in this CRISIS.

Let’s put a stop to this.

Posted By Aapl stock buyer – Washington DC – DC : September 29, 2008 11:05 am

This seems like excessive selling – based on what? Analysts have gotten aapl wrong time after time. aapl will be back in short order.

Murphy Mac

Posted By Murphy, Charlotte, NC : September 29, 2008 11:05 am

Where were these Analyst before the meltdown, plus both these Analyst work for companies in trouble. Morgan Stanley, I believe that just bailed out and for the Market to pay attention to these 2 idiots, WOW. These 2 Analyst could not even open their front door, let alone make predictions.

Posted By Neel Joshi, Redondo Beach, California : September 29, 2008 11:03 am
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