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Technology Stocks : Apple Inc.

AAPL 259.95

-0.4%

Jan 14 3:59 PM EST

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To: Richard Habib who wrote (17000)	8/20/1998 4:19:00 PM
From: Andrew Danielson	Read Replies (1) of 213182

<<I'm assuming increase in revenue qtr to qtr is similar to increase in earnings qtr to qtr. Any reason why 16% increase would be badly inaccurate??>> Actually, this is not true. Revenue goes up proportionally with EPS only given two things: -Margin must remain exactly the same -Operating costs must go up proportionally as well While the margin is arguable, it is extremely unlikely that operating costs would proceed proportionally higher. To illustrate; Q1 to Q2: Revenue was down 12.3% while costs went down only 4.8%. Q2 to Q3: Revenue was flat while costs went down 2%. Going back further to look at FY 97, one sees the gamut run from costs and revenue moving in opposite directions to a 4:1 ratio of revenue movement to cost movement. I do not expect costs to rise even near to 16% for Q1. Therefore, a 16% revenue increase would result in a greater-than 16% increase in EPS profits. Furthermore, I have reason to believe that we may see an even greater than 16% increase in revenue for Q1. Not only is it normally a very busy time of year (as your statistics indicate), but it happens to correspond to other things that could boost revenue. 1: OS 8.5 will be released during Q1. OS 8.0 had a material impact on revenue, and I expect 8.5 to do the same (especially given the advanced word on how much faster the betas are running than 8.1) 2: iMac production and media blitz will be full-throttle for the whole quarter. If we can get anywhere near to 400,000 shipped this quarter, then I shudder to think what will happen in Q1. 3: We can expect the problems surrounding Powerbook supply to be resolved by the time Q1 rolls around. One persistent rumor (see O'Grady's PowerPage) is that Apple is about to introduce replacements for the 292 high-end machine that utilize the 333 and 366 mhz low-voltage chips from Motorola. 4: Q1 will also see the brunt of sales from the soon-to-be speed-bumped desktop G3's (the 333's and 366's.) Plus, margins should hold up well because of the high-end Powerbooks and G3 desktops that offset the lower iMac margins. Andrew

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