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Apple's Jobs: 'We're back'
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January 6, 1998: 3:55 p.m. ET
Computer legend sees first-quarter profits; analysts not convinced
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NEW YORK (CNNfn) - Apple Computer Inc. stunned Wall Street Tuesday by telling investors it earned $45 million in the latest quarter, the first time the struggling computer maker was in the black in more than a year.
The news sent shares of the computer company soaring nearly 20 percent to 19 a share on Nasdaq, where Apple was the most actively traded stock.
Interim Chief Executive Officer Steve Jobs, speaking to a crowd of Apple loyalists at the semi-annual MacWorld conference in San Francisco, said the profit showed Apple was finally on the comeback trail.
"It's all come together for us in our fiscal first quarter which just ended," Jobs said.
Wearing a black turtleneck to symbolize Apple's return to profitability, he said Apple is making gains in market share and he hopes to continue that improvement over the next year. (116K WAV) or (116K AIFF)
Jobs attributed the dramatic turnaround primarily to higher gross margins and continued cost cutting.
He said results were also boosted by product introductions, such as the Power Macintosh G3 computer, the adoption of "built-to-order" manufacturing and increased business through Apple's Web site.
Apple said it expects to report net profits exceeding $45 million on revenues of about $1.575 billion in the fiscal first quarter, ended Dec. 31. The company's financial results are due out Jan. 14.
Based on Apple's 127.3 million shares outstanding, the profit would equal about 35 cents a share. Analysts had predicted Apple would report a loss of 6 cents a share.
In the year-ago first quarter, Apple reported a net loss of $120 million or 96 cents a share on revenues of $2.1 billion.
The profits for the latest quarter ended in December come after Apple suffered more than $2 billion in losses over the last two years and represent the company's first profit since the fiscal fourth quarter ended Sept. 30, 1996.
Despite the good news, analysts say Apple still has many problems to tackle, including its shrinking market share.
"In the near term, the news is positive. It shows the company is doing a better job of forecasting and managing expenses," said Kurt King, a technology analyst at NationsBank Montgomery Securities.
"It doesn't change the dismal long-term picture because the company is continuing to shrink. Without recovering market share it won't have a turnaround," King said.
According to International Data Corp., which tracks computer industry market share figures, Apple's share of the U.S. market has dropped steadily in the past six years from 13.7 percent in 1991 to 4.4 percent in the third quarter of 1997.
King said the main problem Apple is facing is that none of its efforts to increase market share have worked so far.
"You can succeed as a small company, but not as a shrinking company. It's [shrunk] for two years and there's no sign of it reversing. At some time, Apple becomes irrelevant," he said.
In an interview with CNNfn following his keynote address, Jobs said rather than being focused on Wall Street's perception of the company, he's focused on working with Apple executives to repair the basics of the company.
"[We want to] get new products out there and have new ways to buy them. I think if we manage the top line, the bottom line will follow. I don't know what the future will bring, but we're working as fast as we can," Jobs said.
Jobs said Apple is still talking to potential candidates to replace former Chairman and Chief Executive Gilbert Amelio, who resigned under pressure last summer.
"It's an important decision and we want to make the right one. Apple has not named a CEO, but when they do, I'm sure you'll hear about it," he said.
The Apple co-founder also admitted the company has made it too difficult for customers to buy their computers. He said those customer complaints were one of the reasons the company teamed up with CompUSA to launch a new Apple "store within a store." He said they are also sending more computers to resellers.
"In some ways, [the distribution channels] were great, in some, the buying experience couldn't have been worse. Rather than waiting a year in typical Apple fashion to execute [the CompUSA plan] so it would be perfect, we said let's just go out and get them done as fast as we can.
So far 57 stores have been opened. Apple said those have already accounted for 14 percent of the company's sales in its last quarter.
He said Apple was also offering built-to-order systems, fashioned after Gateway 2000 and Dell Computer, to allow customers more choice.
Jobs said he was particularly proud of the new Macintoshes based on the new Power PC G3 chip developed by Motorola and IBM, calling it the most successful product launch in the company's history. Jobs said the company set out to sell 80,000 of the new-generation machines in the quarter, but ended up shipping almost 130,000.
Among the new technologies and products highlighted during Jobs' keynote were Microsoft Office '98, Internet Explorer 4.0, support for digital video and new compression technology designed to deliver higher-quality audio and video over standard telephone lines.
Jobs said there is already evidence the partnership with Microsoft is paying off. The software giant stunned the computer world last summer when it announced it would invest $150 million in Apple.
"When we announced the Microsoft deal six months ago in Boston, we heard boos which I thought was crazy. In an industry of 'flash-in-the-pan' partnerships, this has turned out differently. Microsoft is out to continue a very healthy application business on the Mac," Jobs said.
Ben Waldman, general manager of Microsoft's Apple business unit, said Microsoft has more than 200 developers focused on creating software for the Macintosh platform -- a larger Mac team than ever before.
Jobs closed by saying that while Apple's fiscal second quarter is traditionally the company's weakest, the company remains determined to see its turnaround through.
"We'll be burning the midnight oil again and will be working to deliver a result that will make you proud of us again."
--by staff writer Cyrus Afzali
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