Moody's upgrades Apple

Moody's Investors Service today upgraded Apple Computer's senior and subordinated debt ratings.

The service said that the rating change was the result of improvements to Apple's liquidity and debtholder protection measurements in recent quarters, and reflects the company's improved operating results.

Apple posted a better-than-expected $55 million profit in April for its second fiscal quarter, reversing a loss of $708 million for the same period a year ago. The computer maker's most recent earnings report marked the second straight quarterly profit under the direction of acting chief executive Steve Jobs, an Apple cofounder.

Apple's senior unsecured long-term debt rating was upped to B2 from B3, and its subordinated long-term debt was raised to Caa1 from Caa2.

Moody's said the company's business and operating risk will "remain high going forward," as it attempts to stem further revenue and market-share declines in the face of intense competition from companies that make personal computers based on Intel processors and Microsoft's Windows operating system.

The company has shown improvement, however.

Apple grew its market share in the United States to 4 percent during the first quarter of 1998, up from 3.4 percent during the fourth quarter of 1997, according to an International Data Corporation report released in April. It was the first sign of sequential growth for the company since the second quarter of 1997.

According to Moody's, Apple's debtholder protection measurements have strengthened considerably during recent quarters as a result of the company's increased cash flows and debt reductions.

Moody's also noted that Apple rebuilt its balance sheet liquidity while paying off its short-term debt, acquired NeXT Software for $384 million, and funded restructuring efforts.

At the end of March 1998, Apple's cash and short-term investment balances grew to $1.8 billion, up from $1.5 billion a year earlier, and up from a low of $592 million at the end of the March 1996 quarter.