|
Apple posts 2Q profit
|
 |
April 14, 1999: 6:52 p.m. ET
Company's revenue climbs 9 percent, but analysts cite slow iMac sales
|
NEW YORK (CNNfn) - Apple Computer Inc., benefiting from a 27-percent jump in personal computer shipments, reported stronger-than expected second-quarter operating earnings Wednesday.
Analysts, however, expressed concern over weaker-than-expected sales of Apple's popular iMac computer, and that competition on the low end of the market could eventually slow the company's comeback.
The Cupertino, Calif.-based company posted an operating profit of $93 million, or 60 cents a share, on $1.5 billion in revenue. Analysts polled by First Call expected Apple (AAPL) to log a profit of 57 cents a share.
Including a one-time gain for the sale of 2 million shares of ARM Holdings, and an $8-million restructuring charge, Apple's profit totaled $135 million, or 84 cents a share.
Apple's operating performance outstripped its year-ago results, when it reported a profit of $55 million, or 38 cents a share, on $1.4 billion in revenue.
Apple's second-quarter revenue fell 12 percent from the $1.7 billion it reported in the previous quarter, when holiday demand boosted sales across the PC industry.
"This was a strong report," said Lou Mazzucchelli, an analyst at Gerard Klauer Mattison. "Product demand is strong, the management is good. I'm very pleased with this report."
Investors, however, had a different reaction as Apple shares slipped to 33-3/4 in after hours trading on the Instinet trading system after closing at 35-3/4, up 1-1/8, on the Nasdaq stock market.
"The good news is that Apple is pretty stable, but that's also the bad news," said James Poyner, an analyst at CIBC Oppenheimer. "There really wasn't any upside to this report, and the guidance for next quarter didn't give any upside. You're not going to see a lot of estimates go up tomorrow."
Unit shipments fuel growth
Apple has been enjoying a rebirth since Steve Jobs returned to the company as interim chief executive officer. Under Jobs' reign, the company streamlined its offerings into four market segments and launched the highly popular iMac computer last August.
Apple sold 827,000 PCs during the quarter for 27-percent unit growth. iMacs, however, accounted for 350,000 units, well below the 519,000 units sold in the first quarter.
"Demand for iMac exceeded our most optimistic forecasts," Jobs said in a statement.
That sentiment isn't necessarily held by analysts. Poyner said iMac sales fell well below expectations.
But Mazzucchelli said Apple may have rationed some iMac sales to prepare for the launch of systems featuring 333-MHz processors, which the company also announced Wednesday.
Apple also ended the quarter with one day of inventory. By comparison, direct-selling PC giant Dell Computer Corp. (DELL) reported six days of inventory in its latest quarterly earnings results.
No fear of slow demand
Apple's strong sales belied recent fears about PC demand. Last week, Compaq Computer Corp. (CPQ), the world's No. 1 PC maker, said its first-quarter profits less would fall more than 50 percent below Wall Street estimates. Tuesday, analysts were disappointed with Intel Corp. 's (INTC) first-quarter revenues.
Fred Anderson, Apple chief financial officer, said the company's appeal to the education and graphic-design markets helped keep demand strong.
"Unlike most of our competitors, Apple's success is not strongly tied to the [corporate] enterprise market," he said. "Over the last six to nine months we've clearly taken market share from our competitors in the retail desktop market."
According to market research firm PC Data, Apple held an 11.3 percent share in the retail and mail-order markets in the quarter, more than double last-year's second quarter figures.
But Poyner said such low-cost computer companies as eMachines, which sells units for as low as $399, are rapidly becoming Apple's chief competitors, rather than such companies as Compaq and Dell.
Poyner pointed out that eMachines sold 300,000 units during the quarter, nearly as many iMacs sold in the period.
"These guys are selling boxes and changing consumer behavior," Poyner said. "At $1,199, the iMac looks pretty expensive. People are nervous that Apple will fall back into its old habit of sitting on their price and seeing their market share fall. The gross margins will be there but the revenues will fall."
Gross margins to remain flat
Anderson said Apple expects to report sequential and year-over-year growth in both revenue and unit shipments. Gross margins, however, will likely remain flat or slightly lower as Apple intends to sell more iMacs during the back-to-school buying season.
Poyner forecast 430,000 iMac shipments for the third quarter.
Although revenue growth lagged far behind unit growth, Apple's gross margins rose to 26.3 percent from 24.8 percent in the previous quarter. Anderson attributed the higher margins to better sales of the Power Macintosh G3, which he said accounted for 48 percent of Apple's unit sales with nearly 400,000 shipments.
In contrast, Power Macs accounted for 32 percent of unit sales in the first quarter, a reflection of more sales of the lower-cost, consumer-oriented iMac during the holiday shopping season.
Better Power Mac sales also resulted in a boost to Apple's average revenue per system, which climbed to $1,813 from $1,776 in the first quarter. However, Apple's average selling price was off the $2,090 in last-year's second quarter, which Anderson said was a reflection of lower prices across Apple's product families.
"There's no question average selling prices are dropping all over the marketplace," Anderson said.
Apple ended the quarter with $1.4 billion in cash.
For the six-month period ending March 27, Apple posted a profit -- including one-time items -- of $287 million, or $1.79 a share, on $3.2 billion in revenue, compared with first half 1998 earnings of $102 million, or 71 cents a share, on $2.98 billion in revenue.
-- by staff writer John Frederick Moore
|
|
|
|
|
|
Apple
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
