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."