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Apple thumps expectations, announces IBM chip deal

Apple posts net profits of $111 million for its fiscal fourth quarter of 1999 and said it will address some supply problems by signing on IBM as a supplier of advanced PowerPC chips.

    Apple recorded net profits of $111 million for its fiscal fourth quarter of 1999, beating lowered expectations, and said it will address some supply problems by signing on IBM as a provider of advanced PowerPC chips.

    Apple earned $90 million from operations during the quarter, which translated into earnings of 51 cents per diluted share for the quarter. The company fell significantly short of its mark from the same period a year ago, when it achieved earnings of 68 cents per diluted share.

    Analysts were expecting earnings of 45 cents, according to consensus estimates from First Call.

    Apple at a glance The results were released after the markets closed today. In after-hours trading, Apple shares were up nearly 4 to about 68.

    Including one-time gains, which included the sale of approximately 3 million shares in technology company ARM Holdings, and a net restructuring charge of $16 million, Apple posted earnings of 63 cents per share.

    Net earnings were $111 million vs. $106 million for year-ago results. Earnings were down substantially from third quarter profits of $203 million.

    Revenues for the quarter were $1.34 billion, down 14 percent from the year-ago quarter, the company said. Gross margins were 28.7 percent, up from 26.8 percent in the year-ago quarter.

    The news comes against a backdrop of continued delays in getting some hotly anticipated new products such as the iBook notebook computers out the door.

    In light of product shortages, Apple said IBM would commence manufacture of the new G4 PowerPC chips starting in early 2000. Also, the company said it would sell Power Macintosh G4 systems with slower chips than previously announced in order to have enough systems available for customers.

    The revised Power Mac G4 configurations will now include PowerPC G4 processors running at 350, 400, and 450 MHz, and will be priced equivalently to previously announced systems. The 500-MHz G4 processor will not be available until the first calendar quarter of next year.

    "We are delighted by the response to our new products--we have received orders for over 250,000 new iMacs in the first week since its announcement, and over 300,000 iBooks since its announcement in late July," said Steve Jobs, Apple's interim chief executive, in a statement. "We are geared up to ship all of our products in high volume this quarter."

    Fred Anderson, Apple's chief financial officer, said in a conference call that the company exited the quarter with an "extremely large" backlog of more than $700 million in orders representing some 400,000 units not shipped. A significant portion of those would be from iBook orders; the company said it has received 200,000 orders and only shipped out 6,000 units during the quarter, although that number has risen somewhat in the three weeks since the quarter's close.

    Anderson said the company expects to fill most of that backorder by November, although iBook's will still be in short supply throughout the quarter. Anderson's response came in response to questions about whether or not Apple would be able to get product on the shelves in time for the Christmas selling season.