Apple, Citing Chip Shortage, Warns of Lower Profit
Apple Computer Inc. warned Monday that a shortage of Motorola chips used in its PowerMac G4 will mean lower fourth- quarter earnings.
Apple expects to report earnings of between $75 million and $85 million, or about 43 cents to 49 cents per share, for the period ending Sept. 30, down from $106 million for the same quarter in 1998. Analysts on average had expected a profit of 76 cents a share, according to earnings tracker First Call Corp. Apple made the announcement after the close of U.S. trading Monday. It will report results Oct. 13.
Apple reached a record intra-day high of $80.13 in Nasdaq trading Monday and closed at $79.06, up $2.13. But in after-hours trading, its shares plunged $9.19 to $69.88. Shares have almost doubled this year and had been trading above an all-time high reached in 1991.
The lower earnings are a setback for interim Chief Executive Steve Jobs, who has presided over seven quarters of rising profit. Apple said it will sell half as many G4 machines as previously expected.
“We regret that we will not be able to ship them all this quarter,” Jobs said. “This is a temporary issue, and we hope to catch up early in the coming quarter.”
The news is the first financial blow since Apple’s announced recovery last October, when Jobs proudly reported the company’s first profitable fiscal year since 1995.
“If they can ship all the backlog early, people will be very forgiving,” said analyst Mark Specker of SoundView Financial Group, who had expected earnings of about 75 cents a share, or $131 million.
Jobs said the company has received orders for more than 150,000 PowerMac G4s since the product was introduced three weeks ago. Apple said revenue, profit and unit shipments all will be lower than fiscal third-quarter levels because Motorola Inc. wasn’t able to ship enough of the new G4 processors.
“We’re thrilled with the overwhelming and positive response in the marketplace for the PowerMac G4. This response has made it difficult for us to provide as many of the G4 chips as Apple can currently use,” Motorola said. “The only time a company does not encounter these kinds of challenges during a product launch is when it produces a chip nobody wants to buy.”
Apple had profit from operations of $114 million, or 69 cents a share, on sales of $1.56 billion for its third quarter. Chief Financial Officer Fred Anderson said Apple still expects first-quarter results to show significant growth from a year earlier. Jobs said demand was strong for other products such as the iMac and iBook.
