Tech Industry

Partners not as happy as Apple

While Apple reports profits, Mac-dependent companies are posting disappointing earnings and blaming slow Mac sales.

Apple Computer announced a quarterly profit today, but Mac-dependent companies such as Global Village and Adobe Systems are posting disappointing earnings and placing the blame on slow Mac sales.

As reported, Global Village said yesterday that it expects to report a loss for the quarter ended March 31, largely due to "a continued decline in the Macintosh market" and "significantly reduced OEM shipments to Apple during this quarter."

The company, which makes communications gear for Macs, pegged its operating loss between $2.5 million and $3 million, compared with a $73,000 net profit posted for the like quarter a year ago. Quarterly revenues are expected to fall to $12 million from $19 million.

The "Apple factor" hasn't escaped Wall Street analysts who follow these stocks.

"I don't like Adobe because of the Apple connection--I like it in spite of it," said Steven Frenkel, an analyst for Paragon Capital Corporation. "I doubt that Apple is the future of the graphic arts and video industries. Those people want to get to an open system and Windows NT. There's more software being written for NT."

Some customers think the companies are unfairly singling out Apple for their woes--just as many companies may be exaggerating the impact of the Asian currency crisis on their earnings. In Global Village's case, one customer charged: "I don't know how much they can blame Apple, but as a businessman, I say they certainly can't escape the fact of their poor service."

Added another: "Adobe has released no new titles or upgrades for quite some time, so it's hard to tell where analysts expected their revenue to come from. I do find Adobe products to be among the best in the industry, and expect them to dominate on both platforms."

Nevertheless, companies continue to use Apple as a scapegoat.

Three weeks ago, Adobe posted lower-than-expected profits for the first fiscal quarter, blaming a Mac slowdown. Adobe said Macintosh revenues fell 36 percent from the first quarter of 1997, "compounded by external factors in Asia and in the Macintosh market."

The company posted net profits of $26.7 million for the three months ended February 27, down from $46.5 million reported for the like period a year ago.

Another Mac-dependent company, Macromedia (MACR), is not expected to post its fourth fiscal quarter and full-year earnings until May 7. In January, Macromedia posted better-than-expected third fiscal quarter results, although it still recorded a loss and a decline in revenue compared with the like quarter a year ago.

"A continuing leveling-off or decline in the sales rate of multimedia-capable Macintosh computers, or shifts in mail-order or other distribution mechanisms for Macintosh products could have a material adverse effect on the company's results of operations," Macromedia said in a filing with the Securities and Exchange Commission last month.

To hedge their bets, many Mac-dependent companies increasingly are migrating toward Microsoft. Macromedia, for example, said that its Windows and cross-platform products accounted for about 56 percent of total revenue for the first nine months of fiscal 1998, and are "expected to become an increasingly important component of the company's revenues."

It its latest quarterly earnings report, Adobe said its Windows revenues "continued to show strength," up 18 percent over the first quarter of last year, while revenue from the Mac platform declined.

In a regulatory filing earlier this month, the company stated that "in the past" a majority of its revenue from its applications products came from the Macintosh platform. However, "in 1997, Windows-based application revenue exceeded that of the Macintosh platform for the first time."

It went on to say: "If there is a continuing slowdown of customer purchases in the higher-end Macintosh market, or if the company is unable to increase its revenue from Windows customers commensurate with such a slowdown, the company's operating results could be materially adversely affected."