Apple Continues Resurgence
Apple Computer Corp. on Wednesday reported its first profitable fiscal year since 1995, as sales of its new iMac line helped the rebounding company earn a healthy $106 million in its fourth quarter.
Also Wednesday, Compaq Computer Corp. reported that its profit tumbled 78% in the third quarter, its first full quarter since its acquisition of Digital Equipment Co.
Earnings for the Houston-based PC giant fell to $115 million, or 7 cents per diluted share, from $517 million, or 34 cents a share, in the July-through-September quarter a year ago.
The results were in line with the 6-cent average that analysts surveyed by First Call Corp. had expected. Compaq closed at $25.50, up $1 on the New York Stock Exchange.
Apple’s earnings, which topped expectations, translated to 68 cents per diluted share in the quarter ended Sept. 25, compared with a loss of $161 million, or $1.26 per diluted share, including restructuring charges, in the same period a year earlier. Revenue fell to $1.56 billion from $1.61 billion.
The Cupertino, Calif.-based computer maker’s full-year profit of $309 million, or $2.10 a share, represents a victory for co-founder and interim Chief Executive Steve Jobs, who took over in September 1997. Apple’s shares have gained more than 70% in 12 months as the company rolled out appealing products like the iMac and high-powered Macintosh computers.
“A tremendous downward trend has now bottomed out,” Jobs said.
Apple shares fell $1.38 to $37.38 on Nasdaq. Some investors said the shares fell after the earnings report because of concerns about Apple’s ability to gain more market share and that demand could taper off once the initial enthusiasm over the iMac wears off.
“People could be thinking: ‘This is the last good news and let’s get out while we’re ahead,’ ” said portfolio manager Catherine Ryan of David L. Babson & Co., which owns 1.8 million shares of Apple.
The futuristic iMac, which has a $1,299 price tag including monitor, has sold well since its release in mid-August. Apple said it sold 278,000 iMacs in its first six weeks on the market.
“Apple is starting to get back to innovation in software, which used to be their crown jewel,” said industry analyst Tim Bajarin of Creative Strategies Inc. in Campbell, Calif. “I am absolutely convinced that Steve has turned things around and you now have an Apple that is moving forward instead of moving back.”
The earnings were announced at a multimedia show at an arena in Cupertino, near Apple’s headquarters. The company also introduced the Mac OS 8.5 operating system.
The company generated its last full-year profit in 1995, when it earned $424 million. Apple’s performance has been spotty throughout the 1990s and downright dismal in 1996 and 1997, as it steadily lost market share to personal computers that run on Microsoft Windows.
For the just-completed full year, revenue fell to $5.94 billion from $7.08 billion.
Compaq, the world’s second-largest computer company, acquired Digital in June. It previously announced plans to close six plants overseas and eliminate 5,000 jobs as part of a cost-cutting drive following the acquisition. Sales for the quarter rose 36% to $8.8 billion from $6.5 billion a year ago.
“We . . . believe Compaq will achieve continued strong growth during the fourth quarter,” said Eckhard Pfeiffer, Compaq’s president and chief executive.
*
MORE EARNINGS: C2-3
