January 17, 2001 3:00 PM PST

Apple's losses wider than Wall Street forecasts

Apple Computer on Wednesday announced a hefty $247 million fiscal first-quarter loss, excluding investment gains. The deficit was wider than analyst estimates but in the range of what the company had warned Wall Street to expect.

The loss amounts to 73 cents per share on total revenue of $1 billion, a 57 percent drop compared with revenue in the same quarter a year ago.

Analysts were expecting a per-share loss of 65 cents, according to the consensus estimate from First Call.

In a December earnings warning, the company had told analysts to expect a loss of $225 million to $250 million, excluding investment gains, on revenue of about $1 billion.

The loss is Apple's first quarterly deficit since 1997, the year that CEO Steve Jobs returned to Apple.

In after-hours trading, shares were up 75 cents to $17.56, on the Island ECN.

Fred Anderson, Apple's chief financial officer, said in a conference call that the company expects a "slight profit" in the current quarter. However, the company again cut its forecast for full fiscal year 2001, saying it now expects sales to be about $6 billion, down from the $6 billion to $6.5 billion range it predicted last month.

Apple's quarterly results include a $49 million after-tax gain from the sale of 3.8 million shares of ARM Holdings and 1 million shares of Akamai Technologies. The results include gains and losses from an accounting change.

Including the investment gains and accounting change, Apple's loss for the quarter was $195 million, or 58 cents per share.

"We took our medicine last quarter and brought our channel inventories back down to about five-and-a-half weeks," Jobs said in a statement. "We're starting this year with a bang--shipping our new PowerBook G4 in January, our new 733MHz Power Mac G4 in February, and Mac OS X in March."

Fred Anderson In December, Apple said it had 11 weeks worth of inventory sitting on dealers' shelves and would look to rebates and other promotions to clear the stock.

In the conference call, Anderson said the company has reduced its inventory glut by 300,000 computers, ahead of its target of paring 250,000 machines.

"As a result, we exited the quarter with a near-normal level of channel inventory, which?is down from a level of 11 weeks?at the beginning of the quarter," Anderson said.

David Bailey, an analyst at Gerard Klauer Mattison, said Apple is in a better position in the January-to-March quarter having cut its inventory.

"That was a very strong effort on their part to reduce inventory so dramatically," Bailey said. "The inventory was kind of the bright spot of the quarter. Everything else came in at the low end of expectations."

Apple reduced its inventory by shipping fewer computers. It shipped 659,000 computers during the quarter, a 52 percent drop from year-ago levels. That includes 308,000 iMacs, a 56 percent drop from the same period last year; 100,000 iBooks, a 72 percent drop; 173,000 Power Macs, a 51 percent drop; and 49,000 PowerBooks, a 42 percent decline.

The company also shipped 29,000 Power Mac G4 Cubes, a product that was not part of its lineup until July. The Cube is the product with the most remaining inventory, Anderson said.

Sales of Macs to consumers were actually considerably higher than the 659,000 figure because retailers and distributors pared down their own inventory. Apple said its $1 billion in revenue actually represented $1.6 billion in demand from customers.

In addition, Anderson said Apple saw somewhat lower component costs during the quarter, particularly memory and LCD screens. Anderson said Apple expects parts costs to continue to decline in the current quarter but declined to say whether that might translate into lower prices.

Continuing its recent string of rebates, Apple this week launched a $200 instant rebate on its two upper-end iMac machines in what could be a sign that new iMacs with rewritable CD drives will be coming soon.

Ahead of the earnings report, Apple closed down 31 cents, or 1.8 percent, at $16.81. The shares have been pummeled since Apple first warned of slowing sales in September.

 

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