About that $120 million ...
Scott McKim, <thrscott@hollywoodreporter.com>
So Apple lost $120 million in Q1 1997. I bet we're all getting an earful around the water cooler from our Wintel co-workers about Apple's annual
dance with death. But while there's no getting around this bottom-line
result, let's put those numbers into a little perspective.
U.S. sales of Performas were down the key reason for the Q1 loss but keep
in mind this is one product category in one territory. The irony of this
situation (for a company that has always been criticized for being
overpriced) is that Apple has tended to overestimate demand for low-end,
low-priced systems such as the Performa line and underestimate demand for
higher-end, higher-priced systems, even before clone makers arrived. In
other words, Apple's problem has been excess demand for high-cost, high
margin machines; as problems go, this is a pretty good one to have. But
consider other parts of the Q1 report: Server systems sales up 40% in the
face of the WindowsNT juggernaut; sales of PowerMac systems up 15% in the
face of stiff clone competition; and overall sales in Europe up 50%.
(Note: Quite often reports of sales drops are comparisons to the same
quarter last year, and do not reflect quarter to quarter gains this year,
thus creating the impression that Apple's sales continue to plummet.
Contributing to the loss was also the fact that Apple was, for the second
quarter in a row, basically out of the lucrative portable business. Apple
reported a $200 million backlog of PowerBook orders. Such demand is
indicative of the brand reputation of Apple and pent-up demand for
product. And with new state-of-the-art, faster-than-Wintel systems on
storeshelves, Apple is back in a big way.
Keep in mind that this $120 million loss is on gross sales of $2.1
billion, a 6% shortfall against revenue on a 19% margin. Apple is a huge
company, the third largest single U.S. computer manufacturer (think of
all the hardware and software categories in which Apple does business)
and has $1.8 billion in the bank, enough to buy a $400 million software
company out of pocket. Apple sold more than a million Macs in 1996
amongst a cacophony of criticisms about being an irrelevant platform.
Finally, remember that the Mac platform is more than just Apple now. When
you consider Apple's 1 million Macs sold in 1996, you must also figure in
strong sales from Power Computing (100,000 units in its first year,
quicker out of the gate in shipments and revenues than Compaq was its
first year), Umax (100,000 U.S. units in its first 6 months, with
worldwide sales expected to climb to 300,000 units this year), Motorola
(which just got started with 40,000-some units shipped since November)
and a few thousand systems from DayStar for good measure. With all but
one Apple product line continuing to see sales growth and with these
kinds of figures from licensees, how can you not describe overall
platform sales as strong and growing? Why do you think there were more
developers at this month's MacWorld convention than ever before?
Irony Patrol: If you need proof of the basic strength of the Macintosh
market, I would suggest you look to Microsoft. That's right, Microsoft.
Here's a simple axiom: Trust Bill Gates' greed. As the leading supplier
of Macintosh software, he knows there is money to be made here. He knows
that Mac users account for 18-20% of software sales. If the Mac is in
decline, why is Bill increasing funding for Mac apps? Does he strike you
as someone who throws away money to support his competitors, or as a
decoy for the FTC?
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Scott McKim
New Media Editor, Special Issues
The Hollywood Reporter
Phone: (213) 525-2183
Fax: (213) 525-2390
E-mail: <thrscott@hollywoodreporter.com>
<http://www.hollywoodreporter.com> |
