http://www.infobeat.com/stories/cgi/story.cgi?id=2556589343-073
08:19 PM ET 10/14/98
FOCUS-Apple proves it has turned itself around
(Recasts, new throughout and analysts comments)
By Therese Poletti
CUPERTINO, Calif. (Reuters) - Apple Computer Inc. reported
Wednesday stronger-than-expected fourth quarter earnings and
capped its first full year of profits in three years, proof that
the once-troubled PC maker has turned itself around.
The news was a major accomplishment for co-founder Steve
Jobs -- ousted in a boardroom battle in 1985 with then-CEO John
Sculley -- and who returned over a year ago to help lead the
money-losing company out of its gloom.
Wednesday, Apple said it earned $106 million, or 68 cents a
share, in its fourth fiscal quarter, as sales of its new snazzy
iMac helped it blow past analysts' forecasts, versus a loss of
$161 million, or $1.26 a share a year ago.
According to First Call, the consensus on Wall Street was
for fourth quarter earnings of 49 cents a share.
The quarter was Apple's fourth consecutive quarter of
profits, which have been fueled by its restructuring moves,
operational efficiencies and strong sales of new products.
``It was really a year of thinking different,'' Jobs told a
press conference gathered at the Flint Center near the company's
headquarters, referring to the company's ad slogan. ``Everybody
at Apple has been working really, really hard.''
Jobs, who has been interim chief executive for a little over
a year, gathered the Apple management team on the stage to
rounds of applause and cheers after he announced Apple's
financial results, impressive research data on the iMac, a new
distribution deal and demonstrated what he said is a ``must
have'' upgrade of the Macintosh operating system, Mac OS 8.5.
``For anyone who was concerned about Apple's fiscal health,
we hope this puts that to rest,'' Jobs said.
Revenues in the fourth quarter were flat at $1.6 billion,
compared with year-ago revenues of $1.6 billion, but unit
shipments were up 28 percent. Apple ended the quarter with only
six days of inventory, surpassing Dell Computer Corp., the most
efficiently managed PC maker in the industry, with eight days.
``This means they can play with the big boys,'' said Lou
Mazzucchelli, a Gerard Klauer Mattison & Co. analyst. ``They are
just continuously knocking down all the objections about this
company...These guys are in very good position. I am very happy
for them.''
Gross profit margins of 26.8 percent of revenues were the
company's best profit margins in three years, said Apple chief
financial officer Fred Anderson, although he cautioned that
margins will likely come down slightly in its first fiscal
quarter, due to more sales of the iMac in the product mix.
After only six weeks on the market, Apple said it shipped
278,000 units of the iMac, the sleek, translucent aqua and
ice-colored computer, priced at $1,299. Sales of the iMac were a
little over one-third of Apple's total 834,000 units sold in the
quarter, including its G3 PowerMacs and PowerBooks.
More than 40 percent of iMac buyers are new customers for
Apple, according to a survey of almost 2,000 iMac buyers
conducted by Audits & Surveys, Apple said.
The findings show that 29.4 percent of iMac buyers are
first-time computer buyers, 12.5 percent are ``converts'' who
own other brands of personal computers running Windows and the
remaining 58.1 percent own a Macintosh, Apple said.
Apple's market share, which had dwindled to about 4 percent
of the worldwide PC market, could see some gains in the next
quarter market research data is compiled, with the iMac computer
luring first-time PC buyers.
``First time buyers are very important...it's the most
important customer we can get,'' Jobs said. Apple and Wall
Street analysts have been closely watching the data on the iMac,
a product that will help Apple's revenues grow again.
Indeed, Anderson said revenues in its first fiscal quarter,
ending in December, will likely show year-over-year revenue
growth for the first time in three years, fueled in large part
by sales of the iMac in the typically strong holiday quarter.
Apple also announced a distribution deal with Best Buy Co.
Inc., a nationwide computer retailer which has a big focus on
first-time computer buyers, joining CompUSA Inc. as its only
nationwide retailers in the U.S. Best Buy has 300 outlets.
``There is not a whole lot to complain about,'' said Daniel
Kunstler, a J.P. Morgan analyst.
For the full fiscal year, Apple posted net earnings of $309
million, or $2.10 a diluted share, compared with a net loss of
$1.0 billion, or $8.29 a share, the prior year.
Revenue for the year fell to $5.9 billion from $7.1 billion,
but Jobs pointed out that fiscal 1997 revenues included about
$500 million in revenues from product lines that Apple has
disbanded, such as its printing business and the Newton handheld
computer unit.
Apple's first annual profit since fiscal 1995 caps a
substantial recovery for Apple, after two years of losses
totalling $1.8 billion. In the past 12 months, the company's
stock has traded as low as $12.75 a share, but its stock has
traded as high as $43.75 recently.
Its shares closed down $1.375 to $37.375, after the
''whisper numbers,'' or unpublished numbers among Wall Street
analysts, spun out of control ahead of expectations for a
positive surprise in the quarter, analysts said.
One cloud hanging over the revived computer maker is Jobs'
continued status as ``interim'' chief executive, but Anderson
assured analysts that it is a non-issue.
``Steve is still having fun and obviously he has provided
awesome leadership,'' Anderson said on the conference call. ``He
has brought Apple back from the brink of extinction to where
people are taking notice of us again.''
^REUTERS@
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