Apple gets a big blow in first quarter

Apple Computer appears to have been hit exceptionally hard in the

industry-wide slowdown in PC sales as the Cupertino company announced it expects

to report a first-quarter loss of as much as $250 million as sales slumped to

just $1 billion from the earlier expectations of $1.6 billion.

"The swift industry-wide decline in PC sales will result in Apple's

first non-profitable quarter in three years," said Apple CEO Steve Jobs.

"We were simply not prepared to be hit by three major problems

simultaneously," Jobs said, referring to Apple-specific sales problems, a

general slowing in the PC market and an overall worldwide economic slowdown.

While Gateway, Dell and others have issued similar sales and earnings

warnings, a $600 million shortfall in sales would be a major set-back for Apple

which has mounted a remarkable sales and earnings growth come-back during the

past three years under Jobs. The sales decline has cut Apple’s 2001 sales

forecast from around $8.5 billion to $6-to-6.5 billion. "It has become

increasingly apparent that the market for personal computers has slowed well

beyond our earlier expectations," said Apple's chief financial officer Fred

Anderson.

Just three months ago, Anderson had said Apple was expecting to make a small

profit this first quarter on sales of round $1.6 billion. Besides a slow market,

Apple has had its hopes set high on the revolutionary-looking Cube G4 Macintosh.

But the machine was just outside the price range of many targeted buyers and

technical problems torpedoed sales.

The slowdown in PC sales is also forcing companies like Apple and Gateway to

spend more on advertising and cutting prices more aggressively then they have in

the past two years. Apple spent $135 million on unplanned sales promotions and

another $115 million in cancellation fees on custom parts it ordered and then

didn't need.