April 3, 1997 1:00 PM PST

Analysts don't buy Apple rumors

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Rumors are running wild that Apple Computer (AAPL) is on the block, but many analysts don't buy it.

Last week, Oracle CEO Larry Ellison floated a trial balloon that he might gather an investor group to make a play for the troubled computer maker.

This week, Saudi Arabia's Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud disclosed that he has taken a 5 percent stake in the company, going out of his way to note that he is close friends with Ellison.

And today the New York Times reported that Apple is actively seeking a friendly merger partner in former suitor Sun Microsystems, attributing the story to unnamed Apple executives.

Sun representatives could not be reached to comment on the Times story and an Apple spokeswoman declined to comment on what she characterized as speculation.

But some analysts say that if Apple is looking for a buyer, they can't imagine who would take the bait. "That's the problem," said Wendy Abramowitz, an analyst with Argus Research. "I don't suspect that any big-name computer companies would be interested."

Abramowitz added that Apple's current financial situation and its diminished market share make it an unattractive merger candidate, despite its recent $430 million acquisition of Next Software.

Although Sun was at one point very interested in acquiring Apple--and has had a long-term partnership with Next--some analysts think Apple's problems are too big for Sun to take on at this point.

"Sun could be talking to Apple about a number of things and I would be surprised if it was about an outright acquisition. Sun has to consider the effect this would have with its stock and the valuation," said Daniel Kunstler, an analyst with J.P. Morgan Securities.

Abramowitz agreed. "I doubt Sun is looking at Apple as a complete takeover candidate. If they are considering Apple, it may be for a certain portion of the company but not the entire balance sheet."

She offered one alternative explanation for the swirl of speculation. Her theory on the Saudi prince's investment, for example, is that he is more interested in profiting from an increase in Apple stock sparked by merger rumors than in really joining Ellison's investor group.

Apple stock was up nearly 5 percent today, closing at 18-7/8. Earlier this week, Apple shares rose about 15 percent on news of Ellison's takeover musings. The stock had been trading at a 10-year low.

Oracle representatives have declined to comment on Ellison's efforts and said the CEO has also decided to stop talking about it, at least for now.

Apple CEO Gil Amelio has himself discounted the possibility of a takeover. He told the San Francisco Chronicle last week that he didn't see any obvious candidates for a merger and doubted that even Ellison was really interested in making an offer. He also said that Apple attorneys have dusted off its shareholder rights plan just in case.

Shareholder rights plans, otherwise known as poison pills, allow a company to defend itself against hostile bids by issuing new shares to existing holders at lower prices, diluting any stake a bidder might acquire.

Apple's name has been linked with several potential buyers in the past. IBM and Sony have both been previously rumored as potential buyers. Sun was probably the most serious candidate, but acquisition talks fell off last year, reportedly after Sun negotiators realized how serious Apple's financial problems were.

Since then, Apple has declared several more losing quarters, laid off more than 4,000 full- and part-time employees, and seen at least one institutional investor, the Parnassus Fund, cut its losses and sell off its shares in the company.

"The difference between now and then for these companies to make an acquisition is that Apple's deterioration, which may have been there before, is now more visible," Kunstler said. "The [Copland] OS, for example, was believed to be going nowhere and now we know that it's true."

Apple is gearing up to report its second-quarter results on April 16 and has given preliminary indications it won't be pretty. The company said its revenues will be lower than earlier expected due to fewer sales to its channel, which is still trying to move excess inventory.

Kunstler said he expects the company to report a loss, excluding charges, of $1.36 a share for the quarter and $2.95 a share for the year. He estimates revenues for the quarter will come in at around $1.65 billion, on the low end of Apple's preliminary range. He also estimates the company's annual revenues will fall around $7.5 billion compared with last year.

Apple last month instituted a sweeping round of layoffs and is undergoing restructuring to cut $500 million from its operating expenses. The company says it will return to profitability by the end of the fourth quarter.

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Don't buy apple computer!
If you are a windows user, and are wandering around apple store, this message is for you. I have a macbook 13 inch for two years. My experience has been aweful. I am writing this note so that you will not go through the disappointment and madness I am feeling right now.

Apple computers, imac, macbook, mac pro, and so forth, are all sold at premium price. For the money you take out of your pocket, I strongly believe that you deserve a premium product quality as well as reasonable technical support. But will you really be getting it? Not likely.

First, the quality of the product. On the first day when I received my macbook and tested it out, I found that my external speaker did not work at all. The macbook was not able to play any sound unless I pluged in an earphone. I brought this brand new defect laptop to the apple store, and it took over a week for them to fix it. I had to go to the apple store again to pick it up. Moreover, my hard drive completely died one and half years after the purchase. I had no access at all to everything on the hard drive for over two weeks. Imagine if you are a student, and you are in the middle of writing an essay which was due the next day. Luckily, a very kind technician friend helped me to restore the data, otherwise I would be totally messed up. I don't have apple care, so paid over $120 for replacing the dead hard drive. Now my power adaptor (the very infamous Magsafe) has been weird for more than half a year. When you plug it in, it is up to the mood of the Magsafe plug to decide whether it wants to work or not. It would drive you crazy sometimes regardless what you do, it won't recharge your computer. -- All you could do at that point is to watch your computer running out of battery and die. After a substantive research on the internet, I found many customers have pointed out that Magsafe is not reliable at all. Many of them were able to have a replacement. I talked with Genius Bar, and for some reason they just wouldn't give me a replacement. I explained that this quality issue isn't uncommon, and many users were able to get a replacement at the store. The Genius Bar technician just wouldn't do it. They did give me an option: The price for a new power adaptor is $99.

Next, the service. To be fair, I cannot say all of the apple store staff are like this, but most the points of contact I have encountered so far gave me a feeling that they don't care what my problem is. All they want is to have you pay for something. They over-price the computers because they are overly proud of their products. And of course, they want your money.

Maybe you are thinking about Apple care. Yes, apple care is good only if you are willing to pay $249 up to the front. I won't complain about anything if I spill water onto my laptop because if that's the case, I should be responsible for the accident that I caused. But the issues here are unsatisfying quality and unfair treatment by service staff especially when you think of how much you have paid for it.

Finally, do the calculations. A macbook is $1100+ plus tax and plus all the troubles above. It's just not worth it. I had a Dell before this macbook. It had problems, too. But Dell's price is much more reasonable to me. After all, Dell was much more cost value efficient. Think twice. Apple macbook isn't fancy at all.

:(
Posted by LucySmith444 (2 comments )
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