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After Apple, Brace for a Rough Ride In Tech

Monday, 18 Oct 2010 | 6:25 PM ET

Investors are bracing for a rough day in tech on Tuesday after Apple shares sold off sharply in extended trade while VMWare disappointed investors.

Not since July 21, 2008 has Apple stock traded lower on the back of earnings.

What must you know?

Shares of Apple sank in the after market, selling off as much as 6% after Apple gave an earnings outlook for the current quarter that missed analysts' expectations. (Of course it’s worth noting that Apple often sandbags and guides to the conservative side.)

On a positive note, Apple did report a huge profit increase that blew past expectations. Sales, however, were mixed.

Sales of Apple's popular iPhone jumped 91 percent to 14.1 million units in the quarter. The company sold 3.89 million Macs, an increase of 27 percent.

But on a bearish note, Apple only sold 9.05 million iPods, a decline of 11 percent year over year. And the company missed estimates with 4.19 million iPads.

By the numbers the company said it earned $4.31 billion, or $4.64 a share, in its fiscal fourth quarter, against $1.82 a share last year.

Revenue for the quarter was reported at $20.34 billion, versus $9.87 billion last year.

Equity analysts who follow Apple expected the company to turn in a profit of $4.08 a share on sales of $18.90 billion, according to Thomson Reuters.

The company forecast current-quarter earnings of $4.80 a share on revenue of $23 billion. The outlook exceeds Thomson Reuters' estimate on the revenue side, but falls short on the profit side by 26 cents.

What's Next for Apple?
A look ahead of Apple's next act, with Colin Gillis, BGC Partners and an update on the tech giant's conference call, with CNBC's Jon Fortt.

How should you position now?

Down near $300 I think it’s an opportunity to sniff around Apple stock, says Pete Najarian.

As long as Apple doesn’t violate $290, I’m also bullish says Jon Najarian – Pete Najarian's brother. The pullback is a buying opportunity.

I agree that the pullback may give investors an opportunity, says Karen Finerman, if not in the stock then at least in the options. I’d consider adding to my position below $300

If you’re an investor who believes in the overall tape, then I agree that you should add to a position, says Guy Adami. However, I do not believe in the tape. This may be the catalyst the bears have been looking for.

Between Apple and IBM there’s a lot of room for the market to trade lower broadly, echoes Tim Seymour.

For Apple the music will end, says Colin Gillis of BCG. It always ends for these types of names. We know there's going to be competition, especially for the iPad but there are still a few more quarters coming where they own the tablet space. For the time being I'm bullish. What matters most right now is that Apple has a family of products that are hitting on all cylinders.

Read more:

> Apple Profit Blows Past Forecasts on Strong iPhone Sales


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AFTER HOURS ACTION: VMWARE

Shares of VMware slipped 7% in extended trader after the company released earnings on Monday that disappointed investors as cash flow missed some investors' expectations, even though the results were otherwise positive.

The company posted cash flow from operations of $197 million, far below what most investors were expecting, explains Pat Walravens, an analyst with JMP Securities in a Reuters interview.

Also the company's overall bookings disappointed investors.

However, it's worth noting that VMware's third-quarter profit more than doubled as the growing trend of virtualization and cloud computing gains a larger foothold.


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