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Apple beats estimates
April 19, 2000: 6:46 p.m. ET

Computer maker benefits from strong sales of PowerBook, PowerMac G4
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NEW YORK (CNNfn) - Apple Computer Inc. reported a higher-than-expected fiscal second-quarter profit Wednesday, as its new PowerBook and PowerMac G4 machines sold strongly.
    Not including one-time gains from Apple's sale of its holdings in another company, the Cupertino, Calif.-based computer maker reported that its second-quarter net income rose 72 percent to $160 million from $93 million in the same period in 1999. On a per share basis, its earnings rose 47 percent to 88 cents from 60 cents. The mean analyst expectation for Apple's (AAPL: Research, Estimates) second-quarter earnings was 81 cents per share, according to First Call.
    graphicRevenue rose 27 percent to $1.94 billion from $1.53 billion. About $400 million of Apple's second-quarter revenue came from sales made through its Web site.
    Including one-time gains, Apple's net income rose to $233 million, or $1.28 per share, from $135 million, or 84 cents per share, in the same period of 1999.
    The popularity of Apple's iMac, iBook, PowerBook, and PowerMac G4 computers have enabled the company to have unit growth that is 2.5 times higher than the industry average. Apple sold 1.04 million units in its fiscal second quarter, a year-over-year growth rate of 26 percent.
    "We are thrilled with the quarter -- especially the strong demand for our PowerMac G4s and new PowerBooks," Steve Jobs, Apple's CEO, said in the earnings release. "In addition, Apple continued to strengthen its leadership in desktop movies with iMovie for consumers and Final Cut Pro for professionals."
    "Strong demand for our professional products combined with superb operational efficiency resulted in very strong earnings," Fred Anderson, Apple's chief financial officer, said in the earnings release. "Apple finished the quarter with $3.6 billion in cash and short-term investments."
    Apple also announced a two-for-one stock split for shareholders of record as of May 19. Trading will begin on a split-adjusted basis on June 21.
    In a conference call after the earnings were released, Apple's Anderson said revenue and unit growth are expected to be strong in the second half of this fiscal year. Anderson said that the company's gross margins should be "up slightly" from the second quarter, when they reached 28 percent of revenue, up from 26 percent in the same period of 1999. The computer maker is benefiting from a decline in component prices, such as what it pays for memory chips.
    "The strength of Apple's gross margin was a positive surprise, because of higher sales in the professional market and lower DRAM costs," said Rick Chu, an analyst at SG Cowen Securities. "Unit growth was a little bit less than I had expected, but average selling prices were higher."
    graphicLast January, Apple announced a partnership with the Internet service provider (ISP) EarthLink under which EarthLink (ELNK: Research, Estimates) became the exclusive ISP in Apple's Internet setup software. Apple, which invested $200 million in EarthLink, will profit from each new Mac customer that subscribes to EarthLink's ISP service. Apple's Anderson said Wednesday that the EarthLink agreement will add $25 million to $35 million to the company's gross profit this calendar year.
    Apple's stock closed Wednesday at 121-1/8, down 5-3/4, before the earnings were released. It recovered 4-1/8 in after-hours trading. The company's stock price is 10 times higher than it was when Jobs took over as CEO in 1997. Back to top



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