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Apple sees growth despite depressed sales

Inventiory issues to hit Q1 2001 results too

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The leaks from Apple's sieve-like HQ in Cupertino hinted that the Mac maker's latest fiscals, announced last night, wouldn't be as bad as the company warned t'other day, and sure enough they weren't.

Instead of newly anticipated earnings of around 30 cents a share, Apple made 47 cents a share. That amounts to profits of $170 million, up 54 per cent on the same period last year's $111 million (31 cents per share).

To avoid any suggestion that it might have been overly negative in its profit warning, Apple bosses were quick to point out that without the sale of $62 million worth of ARM shares, the company's earnings would indeed have been 30 cents a share. However, since the sale of ARM shares has been a consistent feature of Apple's quarterly results since 1997 - so it's fair to assume they were always part of the Q4 financial results, ie. Apple's revisions included the sale proceeds - that argument won't wash.

Revenue for the quarter hit $1.87 billion, so its revised revenue predictions were bang on target. Even so, that figure amounts to a 40 per cent increase on the same period last year, though margins fell to 25 per cent from 28.7 per cent. Last quarter, Apple posted revenues of $1.85 billion and earnings of $163 million, so it still managed quarter-on-quarter growth.

For the full year, Apple saw revenues of $7.98 billion, up 31 per cent on 1999's $6.1 billion, and net earnings of $786 million (218 cents a share), up 28 per cent on last year's $601 million (181 cents a share).

Apple's problems appear to have kicked in during September and centre on lower-than-expected sales, with the resulting impact on the company's inventory - so much for its rapid-response inventory management. Sales of Cubes were off mark by some $90 million, and sales to education were down $60 million. It will attempt to rid itself of all that unsold kit during the current quarter, "rather than reducing it gradually over the next several quarters", said CEO Steve Jobs, which suggests that there is a lot of unsold Macs sitting in Apple's storage facilities.

That, he said, will have a negative impact on the current quarter's results, due to be reported early next January, but should at least allow Apple to get the problem behind it quickly. It also raises the prospect of cheaper machines, which should help it over the holiday sales period, though Jobs said less expensive Cubes aren't due until early next year.

Jobs also promised faster Macs "in the next six months" - a very long time in the PC business - and grumbled at Motorola for its inability to ship faster PowerPC processors. Motorola is, of course, working on the G4 Plus, and if it has indeed taped out, as reports suggest, Jobs' prediction should prove accurate. And they better had - the widening gap between apparent x86 speeds and PowerPC's current 500MHz limit will continue to bite over the next few quarters as the dual-processor stop-gap Power Macs are clearly proving not much of a temptation for Apple buyers.

"In light of September's disappointing sales and higher-than-planned ending channel inventories, we are resetting our revenue estimates for the December quarter to about $1.6 billion and are targeting a slight profit," said Apple CFO Fred Anderson in a statement. By which, we assume, he means "slight profit growth" - otherwise the company really is in deep doo-doo. ®

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