Apple Expects to Post Profit for 1st Quarter
Apple Computer Inc. surprised Wall Street on Tuesday by reporting its first profitable quarter in more than a year, a turnaround the beleaguered computer maker credited to cost-cutting and surging sales of new products.
Speaking at the MacWorld Expo trade show in San Francisco, interim Chief Executive Steve Jobs said Apple expects to post a profit of at least $45 million on sales of $1.58 billion for its first fiscal quarter, which ended Dec. 31. Final results will be released next Wednesday.
The news delighted analysts, most of whom had been expecting a narrow loss, and investors responded by bidding the company’s stock price to $18.94 per share, up $3.06 in heavy trading on Nasdaq.
Jobs attributed the profit, which caught even Apple executives by surprise, to better-than-expected sales of the G3 computer line introduced in November. The Cupertino-based company has shipped more than 133,000 G3 computers since they were introduced, Jobs said, exceeding forecasts by roughly 66%.
Although company executives were making no promises about the current quarter--typically one of Apple’s weakest sales periods--they said they expect the company to post a profit for fiscal 1998.
“Apple is coming back,” said Jobs, who has been serving as interim chief executive since the ouster of Gilbert Amelio in July. “Who knows what’s going to happen this quarter, but we’re going to be burning the midnight oil again.”
The profit does not erase all of Apple’s problems. Sales in the latest quarter were down 25% from $2.1 billion in the same quarter a year earlier. The company still has no entry in the fast-growing sub-$1,000 segment of the computer market. And Apple does not seem close to naming a permanent chief executive, even though the search is in its seventh month and was supposed to have been completed in December.
But analysts are guardedly optimistic about the company, which once set out to rule the computer industry but now seems content to carve out a niche in education and publishing markets.
The profit “is undeniably good news,” said Daniel Kunstler, an analyst at J.P. Morgan Securities in San Francisco. “But is it the absolute turning point? They still have to resolve the CEO question, and they have to prove that what they did with the G3 products is something they can repeat.”
Apple hadn’t reported a profitable quarter since September 1996, and even then it was largely due to an accounting maneuver associated with restructuring charges. The last truly meaningful profit for the company, executives said, was in 1995. In the meantime, the company lost about $2 billion.
After such a bleak period, executives took visible delight Tuesday in sharing a bit of good news. “It feels good,” said Fred Anderson, chief financial officer for Apple.
Mitch Mandich, vice president of sales, said the company expects to be profitable in the current fiscal year, largely because of cost-cutting measures and inventory controls. Apple’s work force of 8,500 today is about half its size two years ago.
He and Anderson acknowledged that the search for a permanent CEO has been more difficult than anticipated, and that they are no longer working under even an informal deadline. But both said Jobs, who co-founded Apple in the late 1970s but was later ejected in a boardroom fight, has pledged to continue serving as chief executive until a replacement is found.
Mandich also said Apple is “evaluating” the sub-$1,000 segment of the computer market, but he refused to comment on reports that Apple is developing a network computer, a low-cost machine designed for Internet access.
The currency crisis in Southeast Asia has caused Apple’s sales to decline by about 13% there, executives said, although rising sales in Europe helped to make up for the shortfall.
During his keynote speech, Jobs unveiled several new software products for Apple, including an upgraded version of the Macintosh operating system, and Office 98, a new version of Microsoft’s top-selling spreadsheet and word processor package.
