Apple has loss but says product glut clear

Peter Henderson

SAN FRANCISCO: Apple Computer Inc. reported its first loss in three years on

Wednesday but said it had cleaned out a glut of unsold Macintosh computers and

would return to profitability in the current quarter.

Sharp price cuts helped Apple lighten the supply chain and reduce the

overhang of unsold products held by retailers by half from late last year, the

company said.

"We took our medicine last quarter and brought our channel inventories

down to five and a half weeks," chief executive Steve Jobs said in a

statement.

The Cupertino, Calif.-based company said its net loss was $195 million, or 58

cents per share, in the first fiscal quarter, after a profit of $183 million, or

51 cents per diluted share, a year earlier.

That was the first loss since Jobs returned to head the company he founded in

1997. But Apple had forecast the loss in December and said it would focus on

reducing inventory and introducing new products.

Apple shares bounced higher on the results, hitting $17-39/64 in after-hours

trade on Instinet, up from $16-13/16 at the Nasdaq close.

Stripping out the effects of reporting changes and an investment gain on

sales of stock, including ARM Holdings and Akamai Technologies, Apple's

operating loss was $247 million, or 73 cents per share, in line with the

company's lowered December forecast.

Sales down



Sales for Apple, one of the first to report sluggish holiday demand last year,
dropped to $1.01 billion from $2.34 billion in the prior year.

Analysts on average had been forecasting an operating loss of 65 cents per

share on sales of $1.01 billion for the period, according to First Call/Thomson

Financial.

"Bringing inventories down is good news. That is clearly good news

operationally. The question is what is going to drive things going forward, and

it is too soon to assess that," said Bear Stearns analyst Andy Neff, who is

neutral on the stock.

Apple's stylish Cube had not sold well and he questioned whether consumers

might not wait to buy new machines, since a powerful new operating system, OS X,

pronounced "OS ten", will go on sale March 24 but not be bundled with

new machines until summer.

Apple chief financial officer Fred Anderson told Reuters that he had shaded

his sales outlook for the fiscal year lower to $6 billion from an earlier

expected range of $6-6.5 billion, which he said was due to economic slowness.

Demand for Apple products was equivalent to $1.6 billion in the first quarter

- more than what Apple itself sold since retailers reduced their inventory, he

said.

That was still far below the $2.34 billion of a year ago, but Anderson said

the company could make a profit on $1.4 billion in sales, leaving him

comfortable predicting a profit for the current quarter and building on that

going forward.

Analysts said that Apple's strengths are its strong brand and its more than

$4 billion stockpile of cash, worth nearly $12 for each share.

Apple shares have underperformed the hard-hit computer hardware sector,

falling about 73 per cent against a drop of around 50 per cent by the American

Stock Exchange computer hardware index .HWI) since the beginning of September,

when both were trading near recent highs.

(C) Reuters Limited 2001.