Apple Surprises Investors With $25-Million Profit in Last Quarter
Apple Computer Inc. surprised investors Wednesday by reporting an unexpected $25-million profit for the last three months of its fiscal year.
The Cupertino, Calif.-based computer maker, which had been expected to lose about 30 cents a share in the quarter, posted a profit of 20 cents a share, the first time Apple was in the black this year.
While Apple executives and some analysts welcomed the news as evidence that the long-struggling company has finally turned the corner, others said they expected it to slip into the red again next quarter and that deep problems remained.
Apple released the news after the market closed and its shares jumped $2.125 to $28 in after-hours trading. In regular trading on Nasdaq, Apple shares rose 50 cents to $25.75.
Analysts cited improved manufacturing efficiencies, lower component costs and reduced operating expenses for the better-than-expected performance.
“It is a shock,” said Daniel Kunstler, computer industry analyst at JP Morgan. “It seems they’ve brought the break-even point for their business down pretty dramatically. This is very encouraging.”
In the year-ago quarter, Apple earned $60 million, or 48 cents a share. Revenue for the three months ended in September fell to $2.32 billion from $3 billion a year ago. The $25 million profit included a one-time gain of $17 million, or 14 cents a share.
For the full year, Apple posted a loss of $816 million, or $6.59 a share, reflecting a series of hefty one-time charges for inventory write-downs and restructurings.
In fiscal 1995, Apple earned $424 million, or $3.45 a share.
Fiscal 1996 was a brutal year for Apple as the company endured a sharp decline in its market share, management turmoil and an inability to have the right products on the shelf at the right time. Former National Semiconductor Corp. chief Gilbert Amelio replaced Michael Spindler as chief executive in February, and in the last two quarters the company has started to show signs of a turnaround.
In a statement, Amelio said Apple’s financial situation is stabilized, as evidenced by the improvement in cash flow and gross margins during the quarter.
“By increasing revenues sequentially and fortifying Apple’s financial position in each of the last two quarters, we have achieved two very critical goals of Apple’s transformation,” Amelio said. “We remain confident about reaching sustainable profitability by the end of . . . ’97.
Analysts took his comments to mean the profit would not necessarily be repeated in the next quarter.
Apple’s gross margins--the difference between what it sells its products for and the cost of goods--rose to 22% in the fourth quarter from 18.5% in the third quarter.
More important, however, Apple ended the quarter with more than $1.7 billion in cash and short-term investments on hand, up from $952 million a year ago.
Shipments were down a sharp 26% in the fourth quarter to 932,000 units from the year-ago quarter. But Apple noted that shipments were up 11% over the previous quarter, a sign that customers were buying its products once again.
