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Apple posts $56 million loss

Apple's earnings for the quarter, the subject of much speculation and worry on Wall Street, outperform analysts' estimates. But profitability for the year is off, the company says.

Apple posts $56 million loss
By Dawn Yoshitake
July 16, 1997, 2:00 p.m. PT

update Apple Computer (AAPL) today handed Wall Street a major surprise, posting a net loss far narrower than analysts had expected, as expenses fell and sales were driven by high-end Macintosh sales.

The computer maker reported a net loss of $56 million, or 44 cents a share, for the quarter ending June 28, compared with a loss of $32 million, or 26 cents a share, a year ago.

Wall Street had expected the computer maker to report a loss of $77 million, or 61 cents, according to First Call.

Revenues fell to $1.7 billion for the quarter, down from $2.2 billion a year ago. Revenues, however, were up slightly from the previous quarter--$1.6 billion.

Fred Anderson, chief financial officer, said Apple shipped 698,000 units in the quarter, up 16 percent from the previous quarter. He noted that this increase was largely driven by the education market and a 60 percent increase in sales to Japan.

Entry-level products, which were sold into the education and consumer markets, represented 50 percent of sales and grew by 27 percent in the quarter, Anderson said.

Meanwhile, the high-end Power Macintosh line accounted for about 36 percent of sales and grew by 32 percent from the previous quarter.

But PowerBook sales were



Fred Anderson on missing Q4 profitability
weak in the quarter, falling by 29 percent over the previous period and representing 13 percent of sales in the quarter. Anderson cited an easing of demand for the high-end 3400 PowerBook series, which was introduced last quarter, and general softness in the entry-level PowerBook space.

Despite beating Wall Street's estimates by a wide margin, Apple will not meet its goal of profitability in the fourth quarter, a goal that ousted chief executive Gilbert Amelio had previously stated.

Amelio's resignation last week raised concerns on Wall Street that the company would miss its earnings mark. The high and low predictions made by analysts in First Call's consensus called for Apple to report a loss of as much as $126 million or as little as $14 million.

In the past week, the chorus


Fred Anderson on product lines contribution to sales
of naysayers gained voices. Three analysts revised their third-quarter estimates downward for Apple, and four have lowered their fiscal 1997 estimates, according to a First Call report. Also in the past week, two analysts have lowered their fiscal 1998 earnings outlook for Apple.

Analysts and investors were concerned by the shakeup at the top and by chief financial officer Fred Anderson's reluctance to pick up Amelio's refrain that the company hoped to achieve profitability by the fourth quarter, which ends in September. Those concerns were borne out by today's announcement.

One analyst had the following explanation for Apple's third-quarter performance.

"The reason for the [higher loss estimates] was Gil was let go and that raised a lot of speculation," said Richard Schutte, an analyst with Goldman Sachs.

Schutte said he had expected Apple to post a loss equal to or narrower than his earnings estimate, but did not anticipate the company to come in as far under as it did.

Schutte said that despite a seasonally weak third quarter, Apple was able to largely hold its own against the previous quarter. He added that the fourth quarter ending in September and first quarter ending in December tend to be the company's strongest periods.

Back to intro

 
The report
Apple loses $56 million

Promises made, not always kept

CNET Radio: Live interviews, analysis

The future
Board members may be next

New CEO is anyone's guess

NEWS.COM Poll: Vote on Amelio's successor

The fallout
Stock shows empire in decline

Resellers take wares online

Mac clone maker's IPO at stake

The history
Three months of turmoil

Amelio, Hancock resign (July 12, 1997)

Apple execs criticize Amelio
(March 14, 1997)

The Apple-Next deal (December 20, 1996)