) to neutral from buy.
Analyst Richard Gardner says as the only vertically integrated producer in the personal computer market, maintaining a competitive price against Dell or other Wintel vendors will be difficult or impossible for Apple. Gardner notes the company is adding fixed costs to its operating model with the addition of company-owned retail stores, at a time when revenue (potentially gross margins) is not growing.
Furthermore, Gardner says he thought that the flat-panel iMac and other new products would drive increased sales, but he says this clearly is not happening. He cut his $0.48 fiscal 2002 (Sept.) earnings per share estimate to $0.34, and cut the $0.75 fiscal 2003 estimate to $0.18.
Gardner set a $15 target.