Apple Has A Profitable Quarter, Losing Year

With the overall personal computer market struggling to avoid a crash-and-burn scenario reminiscent of the dot-com meltdown, Apple Computer Inc. has managed to remain profitable.

With the overall personal computer market struggling to avoid a crash-and-burn scenario reminiscent of the dot-com meltdown, Apple Computer Inc. has managed to remain profitable.

The Cupertino, Calif.-based computer maker on Wednesday reported profits of $66 million, or 19 cents per diluted share, for the quarter ended Sept. 29 , which was slightly than the $61 million profit for the quarter that ended in mid-July.

However, these fourth fiscal quarter numbers did not compare well when matched against the same quarter last year when Apple posted a net profit of $170 million, or 47 cents per diluted share. This represents a 61 percent decrease from the profit numbers of the fourth quarter of fiscal year 2000.

Similarly, revenue for the fourth fiscal quarter dropped 22 percent from the same quarter last year to $1.45 billion. However, gross margins, a critical indicator for the vertically integrated computer maker, rose to 30.1 percent in the most recent quarter from 25 percent in the year-ago quarter, according to Apple officials. Observers said these results may reflect Apples fresher laptop lineup and recently-revamped Power Mac desktops.

Most of the other numbers in the financial report were closely in line with those in the fiscal third quarter -- 850,000 Macs were sold in the fourth quarter compared with 827,000 in the previous quarter. The fourth quarter is usually when educational orders come in but Apple officials did not say whether this was a major factor in the quarterly results.

Apple also released year-end totals. For its 2001 fiscal year, Apple said it realized a net loss of $25 million on revenues of $5.36 billion. This represents a slip from net earnings of $786 million on revenue of $7.98 billion in the prior year. However, this places Apple solidly as one of the better-performing computer manufacturers over the last year, when Gateway Inc., Hewlett-Packard Co. and others faced far larger losses.

"We gained market share in education, and iBook sales to education tripled last quarter," said Apple CEO Steve Jobs, in a press release. He also noted the initial launch and update of Mac OS X, the companys next-generation, Unix-based operating system, as well as the opening of the companys retail stores, which is expected to include 25 stores across the U.S. by the end of 2001.

Apple Chief Financial Officer Fred Anderson noted that the company has kept inventory in the channel low. In its darkest financial days, Apple was known for having weeks of unsold and sometimes obsolete product stranded in the channel.

"Our balance sheet remains very strong, with over $4.3 billion in cash. Given the uncertain global political environ-ment and weak economy, we are targeting December quarter revenues of at least $1.4 billion and [earnings per share] of at least 10 cents," Anderson said, in the statement.

In a conference call with press and analysts, Anderson stressed that given the "prevailing turbulent" economic conditions, he felt his "visibility was limited" concerning financial foresight.

As for upcoming quarter, Anderson did say that he expected margins will decrease sequentially, in part due to more consumer products in the mix, lower laptop prices and other factors. Conversely, he said he expected operating expenses to increase sequentially with increased holiday advertising and more research and development expenses, which, he said, would increase by 13 percent year-over-year.

Anderson also said that, perhaps as a result of overall consumer fear, Apple has revised its performance expectations for the retail Apple stores.

"We expect it to result in a small loss for the stores rather than the break-even wed expected," he said, adding that this would not result in a change in the planned rollout of new stores.

As for the educational market, Anderson said that "we havent seen any slowdown in that market yet." He stressed that Apple remained strong in that area and was "gaining share through the iBook." While competitors were focusing on desktop computers in labs, Anderson said, Apple "has a real advantage" through the iBooks portability and wireless communication.

Apples full-year growth rate in education, Anderson said, was 7 percent for the year, with a sharp rise after a flat start this year.

Countering rumors that Apple has instituted staff cuts, Anderson said that headcount remained flat but that included retail store staff and increased staff for an expanded CompUSA retail initiative. "We are investing in some areas," Anderson said, "and trimming in some areas where appropriate, like support and infrastructure -- no massive internal layoffs."