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Apple whacked by iPhone worries
One day before the company is due to report earnings, its shares slide after AT&T says fewer iPhones than expected were activated in the second quarter.
By Elizabeth Strott
High expectations can produce big disappointments.
That's what happened to Apple (AAPL, news, msgs) today, after AT&T (T, news, msgs) reported that only 146,000 iPhones were activated in the second quarter.
The news pushed Apple shares down $8.11, or 6.1%, today to $134.89. One analyst called the news a "reality check" for Apple. The stock was up 0.8% to $135.90 in after-hours trading.
Apple's slump was one reason why the stock market tanked today. The Dow Jones industrials closed down more than 226 points on the day, their worst one-day point loss since March. The Nasdaq Composite Index was down nearly 51 points to 2,640.
The Nasdaq-100 Index ($NDX.X.), which includes the biggest Nasdaq-listed shares, was down nearly 36 points, or 1.8%, to 2,000.55. Apple's loss cost the index 12.6 points, or more than a third the day's loss.
Apple was also the eighth-largest percentage loser among stocks in the Standard & Poor's 500 Index. The index was down 30.5 points to 1,511.04.
Apple watchers should get more clarity on iPhone action once the company reports its fiscal-third-quarter results Wednesday after the market close.
The iPhone was introduced June 29, leaving only two days in the second quarter, and in Apple's fiscal third quarter, for the iPhone to take off. But analysts had forecast between 200,000 and 500,000 activations in those two days.
Pacific Crest analyst Andy Hargreaves said the activation number was low. "It doesn't mean it's a failure, but it's making investors stop and re-evaluate some of the numbers," he said today.
"The reaction is pretty appropriate. Expectations certainly were for a lot more than 150,000 units. Even though it's just two-day sales, it's a reality check," Hargreaves added.
There is still some margin for error due to Web sales and resales over the Internet, Hargreaves said, but the 146,000 is a good proxy for determining total sales of the iPhone.
Another analyst agreed, although he cautioned that the shares, and iPhone sales, had room to recover.
"For the data that came out, Apple's stock drop is probably the right reaction," Piper Jaffray analyst Gene Munster said. "But if you look at where the stock can go over the next year, there is still a significant move up."
Demand dwindling?
Other observers think iPhone sales aren't as hot as everyone had hoped.
"Based on our store checks, we believe that demand for the iPhone has seen a significant decline in the past 10 days," CIBC World Markets analyst Ittai Kidron wrote in a note to clients today. "We have noticed decent inventories at stores, and thin demand at best."Among the stores we visited, most visitors were not looking at the device, and only a very small subset bought it," Kidron wrote.
But Munster cautioned that iPhone sales seemed to be following a pattern set by the introduction of the iPod. "We saw this with the iPod a few years ago," he said. "It takes a few years to take off."
Apple's earnings could be sweet
Although official numbers will likely come in Apple's earnings report, an estimated 500,000 iPhones were sold over the first weekend it hit shelves. At $499 to $599 a pop, that's $249.5 million to $299.5 million, some pretty tasty fruit.
The iPhone will be a massive financial impact on Apple in 2009, Munster said. "You just have to manage the reality of these things," he explained.
Wall Street is looking for earnings of 72 cents per share on revenue of $5.29 billion. In the fiscal third quarter of 2006, Apple earned 54 cents per share on $4.37 billion in sales.
AT&T's earnings shine
AT&T, meanwhile, saw second-quarter net income jump 61% to $2.9 billion, or 47 cents per share, from $1.81 billion, or 46 cents per share, a year ago.
AT&T benefited from the purchase of BellSouth last year, which gave Ma Bell full control of the unit formerly called Cingular Wireless. AT&T Wireless has the exclusive rights to service Apple's iPhone.
Excluding certain items, AT&T earned 70 cents per share, 3 cents ahead of analysts' estimates. The stock, however, did not escape the day's selling, falling 0.9% to $39.68 on the day. It was up slightly to $39.72 in after-hours trading.
One day before the company is due to report earnings, its shares slide after AT&T says fewer iPhones than expected were activated in the second quarter.
By Elizabeth Strott
High expectations can produce big disappointments.
That's what happened to Apple (AAPL, news, msgs) today, after AT&T (T, news, msgs) reported that only 146,000 iPhones were activated in the second quarter.
The news pushed Apple shares down $8.11, or 6.1%, today to $134.89. One analyst called the news a "reality check" for Apple. The stock was up 0.8% to $135.90 in after-hours trading.
Apple's slump was one reason why the stock market tanked today. The Dow Jones industrials closed down more than 226 points on the day, their worst one-day point loss since March. The Nasdaq Composite Index was down nearly 51 points to 2,640.
The Nasdaq-100 Index ($NDX.X.), which includes the biggest Nasdaq-listed shares, was down nearly 36 points, or 1.8%, to 2,000.55. Apple's loss cost the index 12.6 points, or more than a third the day's loss.
Apple was also the eighth-largest percentage loser among stocks in the Standard & Poor's 500 Index. The index was down 30.5 points to 1,511.04.
Apple watchers should get more clarity on iPhone action once the company reports its fiscal-third-quarter results Wednesday after the market close.
The iPhone was introduced June 29, leaving only two days in the second quarter, and in Apple's fiscal third quarter, for the iPhone to take off. But analysts had forecast between 200,000 and 500,000 activations in those two days.
Pacific Crest analyst Andy Hargreaves said the activation number was low. "It doesn't mean it's a failure, but it's making investors stop and re-evaluate some of the numbers," he said today.
"The reaction is pretty appropriate. Expectations certainly were for a lot more than 150,000 units. Even though it's just two-day sales, it's a reality check," Hargreaves added.
There is still some margin for error due to Web sales and resales over the Internet, Hargreaves said, but the 146,000 is a good proxy for determining total sales of the iPhone.
Another analyst agreed, although he cautioned that the shares, and iPhone sales, had room to recover.
"For the data that came out, Apple's stock drop is probably the right reaction," Piper Jaffray analyst Gene Munster said. "But if you look at where the stock can go over the next year, there is still a significant move up."
Demand dwindling?
Other observers think iPhone sales aren't as hot as everyone had hoped.
"Based on our store checks, we believe that demand for the iPhone has seen a significant decline in the past 10 days," CIBC World Markets analyst Ittai Kidron wrote in a note to clients today. "We have noticed decent inventories at stores, and thin demand at best."Among the stores we visited, most visitors were not looking at the device, and only a very small subset bought it," Kidron wrote.
But Munster cautioned that iPhone sales seemed to be following a pattern set by the introduction of the iPod. "We saw this with the iPod a few years ago," he said. "It takes a few years to take off."
Apple's earnings could be sweet
Although official numbers will likely come in Apple's earnings report, an estimated 500,000 iPhones were sold over the first weekend it hit shelves. At $499 to $599 a pop, that's $249.5 million to $299.5 million, some pretty tasty fruit.
The iPhone will be a massive financial impact on Apple in 2009, Munster said. "You just have to manage the reality of these things," he explained.
Wall Street is looking for earnings of 72 cents per share on revenue of $5.29 billion. In the fiscal third quarter of 2006, Apple earned 54 cents per share on $4.37 billion in sales.
AT&T's earnings shine
AT&T, meanwhile, saw second-quarter net income jump 61% to $2.9 billion, or 47 cents per share, from $1.81 billion, or 46 cents per share, a year ago.
AT&T benefited from the purchase of BellSouth last year, which gave Ma Bell full control of the unit formerly called Cingular Wireless. AT&T Wireless has the exclusive rights to service Apple's iPhone.
Excluding certain items, AT&T earned 70 cents per share, 3 cents ahead of analysts' estimates. The stock, however, did not escape the day's selling, falling 0.9% to $39.68 on the day. It was up slightly to $39.72 in after-hours trading.
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