Apple Loss Is Smaller Than Expected, but Revenue Off 15%


A ray of sunshine peeked through the dark clouds hanging over Apple Computer Inc. on Wednesday as the troubled Cupertino, Calif.-based computer maker posted a narrower-than-expected loss of $32 million for its third fiscal quarter ended June 28.

The loss, equivalent to 26 cents a share, was far below the 44 cents to $1.86 a share that analysts surveyed by Zacks Investment Research had been expecting.

Wednesday's announcement was the first good news to come from Apple in many months and follows a staggering $740-million loss for the previous quarter. Since Chairman and Chief Executive Gilbert Amelio took the helm from ousted Chief Executive Michael Spindler more than five months ago, Apple has been frantically slashing costs and trying to stem defections by both employees and customers.

"One quarter of improvement doesn't make a trend," Chief Financial Officer Fred Anderson said. "But we think we've made good progress, and we expect to continue steady progress." The company is hoping to return to profitability by early next year.

The results were announced after the markets closed Wednesday, and Apple shares were unchanged at $16.87, but the stock jumped to $18.625 in after-hours trading. Despite the positive news, it was clear from Wednesday's announcement that Apple is far from out of the woods. Revenue for the quarter, which included a one-time gain of $39 million for the sale of a stake in America Online, totaled $2.179 billion--down a steep 15% from a year ago, though about the same as in the preceding quarter.

For the corresponding quarter last year, Apple recorded a profit of $103 million, or 84 cents per share, on revenue of $2.575 billion.

Anderson said the scarcity of the company's popular PowerBook portable computers, pulled from the market because of quality problems, hurt sales for the quarter. The PowerBooks are not expected to return to dealers' shelves until early next year.

Although the company said it will introduce a line of computers in the fall in the hopes of attracting new customers as well as stemming the defection of old ones, it expects to charge premium prices--a strategy that many believe brought Apple to its current predicament. And it's launching this strategy at a time when the personal computer industry is in the midst of a fierce pricing war that's expected to intensify.

"We don't think of it as premium pricing, we think of it as value pricing," Chief Operating Officer Marco Landi said. "We're going to have products in the entry level, but we're going to avoid entering the price war."

Even so, some analysts were pleased.

"It's very clear that the direction [Amelio is] taking the company is working. He's clearly got the management in place to make sure what he wants done is executed properly," said Tim Bajarin, president of Creative Strategies Research International in San Jose.

Since taking over, Amelio has launched a reorganization, replacing key managers with his own hires; launching an extensive restructuring of the company's operations, including 2,800 job cuts; and closing inefficient factories.

But it remains unclear whether he can solve the basic problem that has long plagued Apple: The company has less than 10% of the worldwide computer market, and the big lead in ease-of-use that it once enjoyed over PCs based on Microsoft DOS and Windows--which enabled it to charge premium prices--has now all but evaporated.

With Apple's stock near a 10-year low, moreover, the company may once again become a buyout target.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World