Some educators worried about the future of Apple Computer in the K-12 market after the company’s stock price plummeted by more than half its value Sept. 29. The drop followed the company’s warning that its fourth-quarter earnings would be substantially below expectations. Sluggish education sales during the back-to-school month of September–when Apple’s computer sales traditionally peak–were a key factor, according to a company statement.
Apple indicated it expects to report revenues between $1.85 and $1.90 billion and earnings per share between $.30 and $.33 when actual results are announced Oct. 18. Before the warning, Wall Street analysts surveyed by First Call/Thomson Financial had projected the computer maker’s earnings would be 45 cents per share. Those estimates were based on expected revenues of about $2.05 billion.
Shares of Apple stock fell from $53.50 to $25.75 on the Nasdaq market following the announcement.
In a company statement, Chief Financial Officer Fred Anderson cited three factors for Apple’s disappointing earnings: “First, we experienced lower-than-expected September sales due to a business slowdown in all geographies. Second, our education sales, which normally peak during September, were lower than expected. And third, our Power Mac G4 Cube is off to a slower-than-expected start.”
The news from Apple has left some educators wondering about the company’s future in the K-12 marketplace.
According to Kathy Schrock, technology coordinator for the Dennis-Yarmouth Regional School District in Massachusetts, the first move she made when she accepted her position three-and-a-half years ago was to have the superintendent mandate that the district no longer purchase any Macintosh products.
“There were a couple of reasons behind my decision. The first was fiscal–I did not think we could effectively support computers that had proprietary parts and pieces and were expensive to maintain,” she said. “The other, more important reason, is that I felt … we should be using real-world hardware in the schools–what the students have at home and what they are likely to encounter in the next few years in the workplace.”
Dell spokesman Dean Kline agreed: “We think there is a recognition among educators and IT professionals buying for education that students getting out of school will be using Windows-based platforms, and they are spending their dollars in a way that indicates that.”
In October 1999, Dell released a statement saying it had surpassed Apple and secured the No. 1 position in sales of personal computers to U.S. schools, according to figures from market research firm Dataquest. These figure were based on unit shipments, but they were hotly contested by Apple officials.
In a company press release, Apple said Dell’s claims of being the education sales leader rely on vendor and channel surveys and do not fully account for Apple’s large direct sales to education. Apple cited figures from Quality Education Data’s “Technology Purchasing Forecast 1999-2000” and a separate market study by International Data Corp. to counter Dell’s claims.
Kline refused to say whether Dell’s September 2000 education sales outpaced the company’s sales during the same month last year. But George Warren, director of K-12 marketing for Compaq Computer, said his company expects to see significant growth in the education market this year.
“We estimate a 40 to 60 percent increase in our K-12 sales this year,” he said. “I think the most recent numbers say the market is growing at 10 or 11 percent, and of course we want to stay above the market growth, but it just seems we have had a fabulous year.”
According to Warren, final figures for Compaq’s K-12 sales this year will be released in January.
At Apple, the going was rougher.
“We’ve clearly hit a speed bump, which will result in our earning … approximately $110 million rather than the expected $165 million for the September quarter,” said Steve Jobs, Apple’s chief executive. “Though this slowdown is disappointing, we have so many wonderful new products and programs in the pipeline–including Mac OS X early next year–and remain positive about our future.”
Apple Senior Public Relations Manager Lynn Fox refused to make any further comments for the time being, saying “Apple is in a quiet period until we announce the actual fourth quarter earnings. . . .”
Apple isn’t the only company affected by recently slumping computer sales. Dell Computer announced Oct. 4 that its projected sales for the quarter ending Nov. 4 would reach $8.2 billion, about 4 percent below expectations. If the trend continues in the fourth quarter, Dell said, its expected annual revenue would fall 10 percent short of projections.
But analysts say Apple’s reliance on a single product–the Macintosh–makes it more vulnerable than other vendors when PC sales slow. Anticipating a slowdown, for example, Dell earlier this year began to shift investments away from its desktop business and into newer markets for internet server and storage products.
“Apple can’t do shifts like this with as much flexibility because they are hardly in those markets,” Kent Engelke, capital market strategist at Anderson & Strudwick Inc., told MacCentral. “The bottom line is that when Apple sales fall, the effect is much worse than with other computer companies.”
Apple Computer Corp.
Dell Computer Corp.
Dennis-Yarmouth Regional School District
Compaq Computer Corp.