Apple shares plunge on consumer spending fears

Many key technology stocks were punished during a brutal day on Wall Street. Shares of Google Inc. and EBay Inc. each lost 12%. Yahoo Inc. ended the day down 11%. Intel Corp., Microsoft Corp., Dell Inc., Activision Blizzard Inc. and Hewlett-Packard Co. were among other companies hit hard.

Apple's decline, which came after two brokerage firms downgraded their rating on the stock, was the steepest and knocked $20 billion off the Cupertino, Calif., company's market value. Its shares reached a 52-week low of $100.59 and closed at $105.26, down $22.98.

Analysts said the sell-off reflected growing sentiment that Americans had started cutting back on computers, televisions and other electronics gear.

Apple has been on a roll in recent years due in large part to the comeback of its Mac business, which has been growing three times as fast as the rest of the computer industry.

But RBC Capital Markets analyst Mike Abramsky and Morgan Stanley analyst Kathryn Huberty each said in research reports Monday that consumer belt-tightening appeared to be hurting Mac sales. They predicted slowing earnings growth for the current quarter and fiscal year, which end today.

Abramsky said that a recent RBC survey found a drop in the number of consumers intending to buy Macs and that "a worsening consumer spending environment" would hurt Apple. Huberty said the computer industry's brightest spot would be in PCs that cost less than $1,000 -- the low end of the market that Apple largely ignores.

Even though it's slowing down, Apple's computer business is expected to keep generating double-digit growth through the next year. And the company has other products to fall back on. The iPod has 71% of the digital media player market, and the iPhone, introduced in June 2007, has become the No. 2 selling smartphone in the U.S.

During economic downturns, consumers typically keep buying electronics even as they cut back on cars and other big-ticket items, said Nathan Safran, JupiterResearch's digital home analyst.

"People don't view buying a computer or an iPod as a large purchase, and they are passionate about the consumer electronics they bring home," he said.