SAN FRANCISCO: Apple Computer Inc. said on Wednesday it had made its
quarterly profit target despite slowing sales after the Sept 11 attacks, but it
cut its current quarter earnings goal to nearly half what Wall Street had
expected, fearing the holiday season would fall flat.
Apple's new retail stores would lose money in the current quarter rather than
breaking even, and business as a whole was suffering since the attacks on the
World Trade Center and the Pentagon, Chief Financial Officer Fred Anderson said.
The company looked to offset some of that disappointment by promising what
could be its first major hardware offering outside its flagship Macintosh
computer line since the Newton handheld in 1993, but Anderson made no promises
sales would jump.
"The consumer needs to show up for the holiday season for the personal
computer industry to do well in the December quarter," Anderson said in a
conference call. "We are cautious." Cupertino, California-based Apple
reported fourth-quarter operating earnings of $65 million, or 18 cents per
share, down 40 per cent from $108 million, or 30 cents per diluted share, in the
year-earlier quarter.
Sales for the period ending in September dropped to $1.45 billion from $1.87
billion. Apple, one of the few PC-makers that had not warned about its results
in recent weeks, had targeted a slight increase from third-quarter earnings of
17 cents per share and sales of $1.475 billion.
Analysts polled by Thomson Financial/First Call had expected on average that
Apple would report operating profit 16 cents per share on sales of $1.48
billion. Anderson forecast December-quarter revenues of at least $1.4 billion
and earnings per share of at least 10 cents. Wall Street's consensus had been 18
cents.
"You've got to give them credit for what is in the rear view
mirror," said Mark Specker, an analyst at SoundView Technology, but he said
the outlook was gloomy.
"I don't really see it as being Apple specific," he said,
"They are facing down the same market as, for example, Intel (Corp) which
didn't choose to be particularly optimistic on its December guidance
either."
Including investment gains, fourth quarter net profit fell to $66 million, or
19 cents per diluted share, from $170 million, or 47 cents per share in the
year-ago quarter. Apple shares rose to $17.18 in after hours trade from a close
of $16.99 on Nasdaq, where they lost six per cent for the day.
Apple is up about 14 per cent this year, putting it in a select group of
technology stocks that have risen in that period. But No. 1 PC-maker Dell
Computer Corp has gained 33 per cent over the same period and at $16.99, its
Nasdaq close on Wednesday, it is a fraction of its March 2000 high of more than
$70.
What's the breakthrough?
Despite the consumer slowdown, Apple research and development is humming,
Anderson said.
The company which introduced the mouse to the world on its 1984 Macintosh and
rebuilt its reputation with products like its titanium-clad notebook, has
tongues wagging again.
Apple teased loyal users that it would unveil a "breakthrough digital
device" next week, setting off speculation among aficionados that a
handheld device and digital music player was about to be unveiled.
"They are guiding down (the earnings target), but you have this 'gee,
well what is the going to be' new product on Tuesday. That's the story,"
said Bear Stearns analyst Andy Neff. Apple in an invitation to a launch said it
had a new digital device. "It's not a Mac," the company hinted.
Speculation centers on a handheld computer that could record and play music,
which would work with or incorporate the popular iTunes jukebox software,
although the company declined to comment.
Specker said Apple's innovation and $4.3 billion cash stockpile -- more than
IBM's -- would buffer it during hard times. "It has a small market share
with a psycho following and they can charge a big premium for their
product," he said.
Tough quarter
But Anderson said the new retail store chain would lose money in the current,
first fiscal quarter and fiscal 2002.
"We now expect that the slowdown in retail that everyone's experienced
since the attack of Sept. 11 will result in our reporting a small loss for our
retail stores for the December quarter rather than the break-even results we had
previously expected," Anderson told Reuters in a telephone interview.
Apple's quarter went out with a whimper, not the usual bang: sales in the
first two months of the quarter looked good but fell sharply after the Sept. 11
attacks, executives said. Apple was not alone, though. Analysts Gartner Inc and
International Data Corp both said PC shipments fell by more than 10 per cent in
the third quarter from a year earlier.
"The US market is still greatly depressed from year-ago levels and is
likely to continue to remain weak for at least several more quarters," IDC
analyst Roger Kay said.
(C) Reuters Limited.