Apple says profits eaten away, flat sales ahead

CUPERTINO, California (AFP) Jan 15, 2003 Apple Computer Inc. said Wednesday it lost money in the three months which ended December 28 and it expected flat sales ahead. Apple made a net loss of eight million dollars or two cents a share in the three months, compared to a profit of 38 million dollars or 11 cents a share in the same period a year earlier, it said.

Apple said it would have made a small profit in the period, but the money was eaten up by a 17 million dollar net charge for restructuring costs and a two million dollar "accounting transition adjustment."

"We have a very strong new product pipeline for 2003, which we kicked off by introducing the two most advanced notebook computers in the industry last week at Macworld," said Apple chief executive Steve Jobs.

"We're going to keep investing through this downturn and continue to move our products and distribution channels ever further ahead of our competitors, so that when the economy rebounds we will be positioned for growth."

Chief financial officer Fred Anderson said the company was "extremely pleased" with its ability to meet its revenue target for the three months, which make up the first quarter of its business year.

"Looking ahead to the second quarter of 2003, we expect revenue to be relatively flat with the December quarter, and expect a slight profit for the quarter," Anderson said.

Hey, Hal. Maybe they should "copy some technology" and achieve profitability, eh?

No, Apple will continue to earn money by creating innovative new products. The competition can continue their inferior attempts to copy Apple's technology, but it will not assure them profitability.

Apple Projects 2nd-Quarter Profit But Vows to Keep Spending

By Mark Boslet - Dow Jones Business News
PALO ALTO, Calif. -- Apple Computer Inc. posted a respectable fiscal first quarter with a 7% increase in sales and an outlook for revenue to hold steady in the seasonally slow second quarter.
The computer maker said the tepid market remains a challenging environment, but that it would continue to spend aggressively on product development despite concerns on Wall Street that the company should improve its profitability.
"We're not going to mortgage the future for short-term profit maximization," Chief Financial Officer Fred Anderson said on a conference call. "We have an incredibly strong pipeline of products coming."
He declined to discuss the products. But he said he believes Apple has gained market share in the consumer market and the company wants to have innovative products to gain additional share when the downturn ends.
For the quarter, Apple reported a net loss of $8 million, or 2 cents a share, compared with a profit of $38 million, or a 11 cents, a year ago. The results included $19 million of charges and would have been 3 cents a share without the items, matching Wall Street's consensus estimate, as calculated by Thomson First Call.
Revenue came in at $1.47 billion, slightly less than the $1.49 billion analysts expected. However, the company trimmed inventories by 11% in the quarter and without the reduction would have beaten the expectation.
Anderson said revenue should remain "relatively" unchanged in the second quarter and that the company expected a "slight" net profit.
With the second-quarter revenue consensus at $1.41 billion, many analysts will likely raise their projections even as they trim their earnings estimates. The earnings consensus on the Street is for 4 cents a share in profits. Apple explained its "slight" net profit outlook by saying interest income, a key generator of income, will fall because of lower interest rates to about $20 million in the quarter from $29 million in the first quarter.
For the first quarter, Apple said sales in the Americas and Asia Pacific were solid while business in Europe and Japan was weak.
Kevin Hunt, an analyst at Thomas Weisel Partners, said the quarter was largely as expected, and he called the outlook "positive." The challenge for company executives is "they have to reaccelerate revenue," he said. Hunt doesn't own shares of Apple and his firm does no banking business with the company.
Apple's education and small-business markets have remained soft, even as the company has built momentum in the consumer market, he said.
Another difficulty facing the company as it tries to penetrate the corporate market is that it has a pricing disadvantage, says Barratt Jaruzelski, a senior vice president at Booz Allen Hamilton. The higher prices for its computers will discourage broad deployments, he said.
However, there will always be a place in the industry for Apple, which pioneered the computing business in the 1970s with the introduction of the Apple II, he said. "They are a sustainable niche player."

Well, they can't make money on their hardware, which can't compete with PC's on performance, price, or pace of improvement.

And their software only runs on their hardware, so no matter how good the S/W is supposed to be, obviously they can't make up for their slow hardware sales by selling S/W for the machines they're not selling.

If Apple were smart, they'd get out of the hardware business entirely, and go into competition with Microsoft.

Oh, wait. Gates already bailed them out, didn't he? They probably can't compete with MS head-to-head.

The hardware business has obviously passed them by....

I'd say it's only a matter of time before Apple goes under, unless they make some very major changes.

Well, they can't make money on their hardware, which can't compete with PC's on performance, price, or pace of improvement.

That is their main problem, but it's temporary. Motorola has done an abysmal job with G4 development, which is why later this year Macs will get PowerPC 970 processors from IBM. And even today they can make money on their hardware, note that after nonrecurring charges they had a profit.

Gates already bailed them out, didn't he?

No. You may be thinking of the stock deal from a few years back, which was the public part of a large settlement regarding MS patent infringement.

If Apple were smart, they'd get out of the hardware business entirely, and go into competition with Microsoft.

While "go into direct competition with Microsoft" is rarely a winning strategy, Apple is prepared if Microsoft decides to fire the first shot. Keynote is a not-very-subtle message that Office is replaceable if MS halts Mac development.

I'd say it's only a matter of time before Apple goes under, unless they make some very major changes.

Yes, that's as true as it was when I read it a few years ago. And in 1997. And 1995, 1992, 1990, 1988, 1987, and 1984.

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