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January 29, 1989

APPLE SHARES TAKE NASTY TUMBLE ON WARNING OF PROFITS SLUMP

By CBR Staff Writer

Apple Computer Inc shares crashed $4 even to $37.625 in early trading on Wall Street Friday at a time when the market as a whole was up 32 points on the Dow Jones Index after the company warned that profits for the second quarter would be down at around 35 to 45 cents a share, against the 61 cents it did a year ago. Reason is that the company is stuffed with memory chip inventory bought at the peak of the shortage-induced price premium back in the summer. The company notes that it tried to recoup its outlay by putting up prices in the autumn, only to find that users moved away from the more profitable – but memory intensive – models of the Mac II and SE for skinnier configurations in the expectation that they could populate them up with third party memory more cheaply. So on January 17, the company cut prices again on machines with large amounts of memory, and says that while it expects demand to rise as a result, the effect will be to put second quarter margins under pressure. Apple is still looking for 30% growth in its worldwide business this fiscal.

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