Apple Hits Consensus, Posts $38M Profit

Apple chalks up a net profit of $38 million for the period that included both Sept. 11 and the all-important holiday buying season.

At the close of the market Wednesday, Apple Computer Inc. reported its financial results for the first quarter of fiscal 2002. The company chalked up a net profit of $38 million, or $0.11 per diluted share, for the period that included both Sept. 11 and the all-important holiday buying season.

This is right in line with the Thomson Financial/First Call poll of analysts, which estimated the Cupertino, Calif., company would achieve an earning of 11 cents per share.

Compared with year-ago statistics, this looks overwhelmingly favorable: The first quarter of fiscal year 2001 saw Apple posting a net loss of $195 million, or $0.58 per diluted share. However, that quarter reflected a strategic move by the company to swallow at once losses brought on by, among other things, abysmal sales of the Power Mac G4 Cube, a compact and stylish desktop computer that failed to catch on with even the companys adherents. The goal, stated at the time by members of Apples board of directors, was to take on the losses as a lump sum rather than carry some over to the subsequent quarter.

Likewise, revenues and margins were also up compared with the year-ago numbers. The former hit $1.38 billion, up 37 percent; the latter attained 30.7 percent, up from -2.1 percent.

Factored into these numbers, the company said, were a $24 million restructuring charge and a $23 million gain from the sale of equity investments.

In a conference call with analysts, Fred Anderson, the chief financial officer for Apple, broke down the sales statistics, saying that portables made up 40 percent of unit sales. He credited price reductions and the inclusion of a "combo" (CD-RW/DVD) drive for 116,000 PowerBook sales. He also stated that iBook sales broke the 600,000-unit mark, compared with only 700,000 old-style iBooks sold over that products lifetime.

Though Anderson did not directly note sales numbers for Power Mac desktop models, subtracting from his figure of total CPU sales of 746,000 leaves Power Mac numbers at under 30,000 total. He did say that Power Mac sales had declined: "Perhaps because of the economy, perhaps because [professional users] are waiting for Mac OS X applications," he said. Even so, Anderson noted, the number of Mac OS X-native applications available for purchase increased by 40 percent during the quarter. He said he expected the balance of desired Mac OS X software to hit the market by spring.

Anderson also said that Apples recently introduced iPod MP3 player has been a "huge success," racking up sales of over 125,000 units in less than two months since its introduction in October.

As for Apples new chain of retail stores, Anderson said, "Overall, were very pleased." Though the company recently revised its estimate that the stores would turn an overall profit to posting a small loss for the year, Anderson said that the stores "continue to gain traction." The existing stores garnered $48 million in revenue for the quarter, he said. In addition, Anderson said that polling at the Apple stores found that 40 percent of customers were new to the Mac platform.

The company ended the quarter with just under $4.4 billion in cash and short-term investments.

Looking forward, Anderson said that Apple expects the companys revenue will grow to approximately $1.5 billion for the second quarter of the fiscal year; however, he said the per-share earnings will remain flat, in part due to greater expenses, such as air freight, attached to introducing and shipping the new iMac line.

Speaking of the new iMac, Anderson said that initial orders of the new model "exceeded expectations" and that the company will be unlikely to meet customer expectations, at least initially. However, he noted that gross margins on the new iMac are lower than on both the previous model and the Power Mac line.

Overall, Anderson said, "we feel good about the second part of our fiscal year." He pointed to a "robust pipeline of new products to come" in the rest of the year, an improving economy and the expectation that "most of the important professional applications [for Mac OS X] will be available in the spring" as positive auguries.