Last week, the stock of Apple computer entered what appeared to be a free fall, losing over several days more than 70 percent of the company's market value. Suddenly an outfit that everyone thought was worth $16 billion was only worth around $4 billion. Several readers asked me to comment on this phenomenon and give them some idea just what the heck is going on. So with the caveats that this isn't normally an investment column and I own no shares in Apple Computer, that's exactly what I am going to do. But understand that I do so under protest. Macintosh users are only surpassed by Web-TV users in their zealous defense of the product they love — a defense that often descends to name calling and what my Mom called "bad language." So don't kill me, I'm only the messenger.

The questions in any investor's mind have to be, "Was Apple over-valued before this drop or is it undervalued now? In other words, should I have sold (or should I sell) or is this a buying opportunity?" I think it is definitely a buying opportunity.

First look at the reason for Apple's fall — a warning to stock analysts that earnings in the third calendar quarter (Apple's fourth fiscal quarter) would be substantially below analyst expectations. Apple, just like any other public company, is required to make such announcements when the numbers start to diverge from plan. It's the law. In Apple's case, sales for the snazzy new G-4 cube computers were slower than expected, inventories were building in the sales channel, threatening revenues and profits. This profit warning came as just one of several from technology companies, including Intel and Dell Computer. And every one of these stocks has taken a beating.

Apple probably suffered more because Intel and Dell (and others) were down, too. The entire technology sector took it in the shorts, and that's an intentional pun because the investors who shorted any of these stocks made fortunes when they fell. And that is part of what is happening here: This is a jittery market that enjoys such volatility because it makes lots of money for lots of people. The brokers make money no matter which way the stock goes. They just want buyers and sellers. The shorts and option traders clean up, too. There are many more of these people than there used to be and each is a little shark that thrives on stock movement. So there is less of a reason for the market to even want to moderate itself. After all, this is just one sector going down while others go up. It is hardly the market crashing.

Nor is it Apple crashing, either. The warning was for lower profits, remember, not for a loss. The company still expects to earn something like 33 cents per share. It has low debt, lots of cash, a popular line of products (except, perhaps, for those darned cubes) and more products on the way. Most importantly, it has CEO-for-Life Steve Jobs staring at his own unexercised options to buy 10 million Apple shares at a price that today makes those options absolutely worthless. Steve will do anything — ANYTHING — to bring his options back to life. And you don't even want to know Steve's definition of "anything," because it is scary.

So here is what I predict will happen for Apple's stock in the next few months. It will start to revive almost immediately because that's just the way things work. Panic sellers over-sell the stock. Apple is simply worth more than $4 billion. Heck, they have more than $5 billion in CASH and short term investments, making the rest of the company valued at less than nothing. The market is not stupid and will readjust. So my recommendation is to buy as soon as you can. I'm not buying any, because I'm too poor and stuck with a house I can't afford, but you go right ahead.

To keep the stock price going up, Apple might use some of that cash to buy back shares. I know I would if I was Steve. This is a reward for shareholders who hang in there, and for Apple, it would be a very good investment.

Then Steve will do whatever he can to nullify his own profit warning. The warning, after all, is based on what the profit appears to be BASED ON THE CURRENT PLAN. Change the plan and maybe the numbers will change, too.

Changing the plan, in this case, means shedding what little fat Apple has left, postponing some expenditures, accelerating some collections, and trying like crazy to push those cubes. These techniques will work, and when Apple does report profits they will be better than expected, pushing the stock up that much more. Remember, you heard it here first.

Once the current quarter is finished, Apple can anticipate two wonderful events — Christmas and OS-X. Christmas is Apple's first fiscal quarter because it is always the company's biggest quarter for sales. There is no reason to expect this Christmas will be any different. Those cubes will go streaking out of stores and the stores will have adequate inventories for once, precisely because of the current glut. And even better for Apple, probably 70 percent more Macs will be sold online from the Apple Store than last year. That's if Apple's online sales increase matches analyst expectations for all online Christmas sales. Remember, Apple makes more profit from Macs sold from the Apple Store than through dealers, so this online bump means a lot for earnings.

And then there is OS-X, the long-awaited version of the MacOS with true multitasking and a ton of other neat features. OS-X is SOFTWARE, which means Apple's profit margins can approach 90 percent. If Apple can get a million or two customers to upgrade to OS-X in the Christmas quarter, it will be a significant profit nudge — not just because of the software itself, but because some customers will be buying new hardware just to run it.

There it is. I predict that Apple will recover much of the ground it has lost and will do so by January or February.

Now for the bad news. Apple is a boutique computer company. There is no way, no matter how clever Steve Jobs is and how good he is at beating new products from his engineers and programmers, that Apple can compete on price with Intel-based PCs. It's the $1799 price that has people staying away from the G-4 cube. Apple prices will always be higher simply because Apple has to pay for developing and supporting its own operating system - something Dell and Compaq, and Gateway do not. Now a thousand readers can send me messages (and probably will) saying "yes, but the MacOS is better." Fine, it is better, but Windows market share proves that it must not be enough better to get regular folks to buy.

Apple is a boutique, so what? That's exactly my point. BMW is a boutique car company. Porsche is, too. Yet both are strong businesses and get no flack for being boutiques. Apple does get flack. This is, I think, because Apple still markets against Intel and Microsoft, or at least we perceive them as doing so. It is also because stupid stock analysts can't get their slide rules around the idea that maybe Apple isn't really competing with Microsoft and Intel. Does Porsche target Chevrolet? Nope, not even the Corvette. They couldn't care less.

And neither should Apple. The PC market is big enough and diverse enough for a boutique computer company to not only survive but to do well, which is exactly what Apple has been and is still doing.

It is time to think different.