To All
Apple's $100 million loss sets back recovery
By Kourosh Karimkhany
CUPERTINO, Calif., Jan 4 (Reuter) - Apple Computer Inc.'s (AAPL.O) expected loss of $100 to $150
million in its fiscal first quarter is a serious setback to the company's unfolding comeback plan, industry
analysts said on Saturday.
Apple was banking on a strong Christmas season this year to convince potential customers there are still plenty
of people using the Macintosh and plenty of people willing to write software for it, analysts said.
The company also had hoped to show software developers there would be enough demand for their products
while Apple engineers finish a major overhaul of the Mac's fundamental software with the help of recently
acquired Next Software Inc.
But the loss shows Apple is having a much tougher time selling its PC than analysts expected.
"I can't tell you how many people have asked me about whether they should be buying from Apple when
there's so much negative news out there," said Richard Zwetchkenbaum, an analyst at market researcher
International Data Corp.
In the September quarter, Apple's share of the PC market worldwide fell to 5.4 percent from 8.7 percent in the
same quarter a year ago, according to a recent Apple filing with the Securities and Exchange Commission. In
the U.S., its share fell to 7.3 percent from 13.2 percent.
Apple on Friday blamed a shortage of PowerBook laptops and slow sales of its Performa line -- which is
geared toward home users -- for the shortfall. Consumer sales traditionally account for 40 percent of Apple's
Christmas quarter.
Revenue for the quarter ended Dec. 27 will be about 10 percent less than the $2.3 billion reported in the
September quarter, Apple said.
Meanwhile, Apple faces more technological competition from PCs based on Intel Corp. (INTC.O) Pentium
microprocessors. Intel will release in a few weeks a new Pentium with so-called MMX technology that can
handle computer graphics and sounds much better than before.
Tim Bajarin, president of market research firm Creative Strategies International Corp., said some consumers
may have put off buying Macintosh Performas -- until now, a favored brand for running multimedia software
-- in favor of waiting for PCs based on Intel's MMX chips.
"It is an image problem," Bajarin said. "Apple has not been able to convince the consumer that the software
developers are coming back, and has not been able to convince them that Apple will be around in the future."
Not counting the $400 million purchase of Next, Apple expects to report a loss of $100 million to $150
million, the company said. Based on Apple's 123.7 million shares outstanding, the loss would be about $0.80
to $1.21 a share.
Wall Street expected Apple to report a per-share loss of $0.04, according to a survey of analysts by First Call.
The expected loss puts pressure on Apple Chairman Gilbert Amelio, who on Tuesday will outline his
company's strategy to thousands of Macintosh customers and programmers at the Macworld trade show.
Amelio said on Friday the company would have to reduce its expenses by about $1 billion to $8 billion
annually, to return to profit, a move that could include another round of firings.
Last year, the company laid off about 1,300 people.
In recent speeches Amelio said he did not expect the company's revenue to grow until 1998, but other
executives have said they expected the company to have "sustainable profits" by the end of the March quarter.
While it is too early to forecast the March quarter's results, Apple is "telling people to recalibrate their
expectations," David Harrah, corporate public relations director, said.
Copyright 1997, Reuters News Service |
