March 18, 2002 9:45 AM PST

Analysts: iMac woes mean "tight" quarter

Apple Computer's supply problems with its new iMac likely mean that the next few weeks will make or break the company's second quarter, which is expected to be "extremely tight," according to one report.

In a research report previewing earnings for the leading PC companies, Prudential Securities analyst Kimberly Alexy became the latest analyst to flag potential problems for Apple's quarter ending March 31.

"Although demand for Apple's new iMac product remains strong, we are concerned about the company's ongoing inability to execute new product ramps efficiently," she said.

The new iMac was trotted out with great fanfare in January, but Apple has not been able to ship large numbers of the PCs because of a shortage of flat-panel displays, among other issues. As a result, a fairly lengthy waiting list of consumers and dealers for the new PC has emerged, with some dealers telling customers they may not have iMacs for five to 20 weeks.

The company has also managed to irk its retail partners, which argue that Apple is stocking its own stores at their expense.

Steve Jobs will speak at Macworld Tokyo later this week and, if history is any indication, he will likely address the issue.

Although it's too early to determine how glitches in the iMac's launch will hurt the company's bottom line, analysts are beginning to handicap Apple's quarter. The company is expected to report second-quarter earnings of 11 cents a share on revenue of $1.43 billion.

Alexy said she expects Apple to be upbeat about its June quarter, but the outlook will most likely offset weakness in the March quarter.

Other analysts echo that view.

In a recent research note, Lehman Brothers analyst Dan Niles said he was satisfied that Apple has corrected its supply problems.

According to Niles' checks, Apple was slow to ship its high-end 800MHz iMac in volume due to manufacturing problems, but it has now resolved the issue. "We expect the two 700MHz models will ship slightly behind their end-of-February and end-of-March schedules," he said.

Niles also said he sees a challenging quarter for Apple, but he expects plenty of the new iMacs to be available for the June quarter, which will help the company, "assuming the demand is there."

 

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