Apple beats expectations, announces buyback
The seventh time is a charm for Apple, which reports its seventh-straight profitable quarter on revenues of $1.56 billion.
Apple also announced a stock buyback plan, encompassing up to $500 million of its common stock.
Apple recorded profits of 69 cents per diluted share for its fiscal third quarter, excluding one-time gains. The company bettered its mark from the same period a year ago, when it achieved earnings of 50 cents per diluted share--which also excluded one-time gains.
Net earnings were $203 million vs. $101 million for year-ago results. The fiscal third quarter's results included an $89 million after-tax gain from the sale of 10 million shares of ARM. With this one-time gain, Apple vaulted past expectations with earnings of $1.20 per share.
Analysts were expecting the company to turn in earnings of 64 cents a share for the quarter, according to a consensus of analyst estimates from First Call. Apple reported $1.56 billion in revenues, up 11 percent from year-ago revenues of $1.4 billion. It was the third-straight quarter of year-over-year growth for the company, considered an important sign of the company's health and long-term prospects.
"We are delighted to report our seventh consecutive profitable quarter," said Steve Jobs, Apple's interim chief executive in a statement. "Apple is growing faster than the industry, driven by the continued success of iMac in our consumer and education markets."
Apple said sales of the iMac drove overall unit growth 40 percent above the prior year's results, an amount almost double that of the forecasted unit growth for the industry as a whole, according to International Data Corporation.
As recently as two years ago, Apple was tottering on the brink of disaster after the abrupt resignations of chief executive Gilbert Amelio and executive vice president Ellen Hancock left the company's leadership and future in question. But Jobs, ousted from the company's leadership some 10 years earlier, has stepped in as interim chief executive to rally the company he helped found.
Now, Apple's rebound continues to be fueled by the iMac computer, introduced more than a year ago.
The strong financial results capped a rally in Apple stock that led to last week's six-year high of 54.50 and culminated in another high mark today of 55.94. The all-time high for Apple's stock is 68 per share, reached on March 29, 1991, according to Apple's records.
Anticipation building for Macworld
But the Cupertino, California, company's stock price has also been on the
rise because of what's still to come.
Analysts expect that soon, the user-friendly and colorful designs of the iMac will carry over to notebooks and other products. Previews of a consumer notebook are anticipated at the Macworld Expo trade show next week in New York.
Apple has refused to comment on unannounced products.
Later in the year, Apple is expected to come out with a new generation of the popular iMacs with larger screens, and the company may even re-enter the handheld market with an Apple-branded PalmPilot device, said various sources.
Apple needs to extend interest in the Mac beyond the Mac faithful, said Dataquest's Brown. "My concern is that the 'installed base' is running out of gas. Can they continue to turn the base?"
Products further down the road--most likely next year--include new systems based on the powerful PowerPC G4 processor, the successor to the G3 chip used in contemporary Macintosh systems.
A Motorola spokesperson said today that the company plans to begin shipping G4 processors in the second half of this year. Apple products based around the chip, however, aren't likely to materialize until later.
Meanwhile, Richard Doherty, president of Envisioneering Group, reported that sources close to Apple have told him that the company has been working on a "single-chip iMac," which seeks to reduce the large number of chips used in a computer to little more than the processor, a second supporting "iMac" chip, and memory chips. Such a move would cut down on production costs and boost profit margins.
On the software side, an upgrade to the Macintosh operating system is expected in the fall, and by early 2000 Apple will release a new operating system called Mac OS X, both of which should provide a significant boost to profit margins.