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Apple back in the black

But sales, revenues and margins fell

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Apple returned to profitability during its second quarter, but its underlying figures will make uncomfortable reading for many Mac users.

The quarter - which ended 31 March - saw revenues fall 26 per cent on the same period last year to $1.43 billion. The company's gross margin fell from 28.2 per cent this time last year to 26.9 per cent. Both figure are close to those posted for Q2 1999.

In Q2 2000, Apple's net profit of $233 million (64 cents a share) was boosted significantly by the sale of some of its ARM shares. The company made the same move this quarter, but the $89 million it made served only to offset a tax charge of $86 million. That left it with $3 million to boost its operational profit of $40 million (11 cents a share), taking it to $43 million (12 cents a share).

With only eight million ARM shares left, however, Apple can't use this tactic much longer, especially if hi-tech stocks remain depressed. Apple's $89 million came from the sale of 23 million ARM shares. In Q1 it made $49 million by selling only 3.8 million shares - that's one heck of a fall in the value of that shareholding.

Apple sold 751,000 Macs during the quarter, a fall of 28 per cent on last year's figure. Again, that loss negates the year-on-year growth in shipments the company saw in Q2 2000 over Q2 1999. That said, it still marks a 13.9 per cent increase over Q1 2000.

Still, times are hard, and with the whole PC industry hurting, Apple's results show that it at least can reverse the woes of Q4 2000, largely by taking a hit last quarter to help clear out a reseller channel stuffed full of unsold stock.

Apple's CFO, Fred Anderson, noted that the company has got that inventory down to four weeks, the target it set itself last quarter.

He also said the company expects to see sequential increases in revenues and earnings over the next two quarters. Apple has a second-half target of $3.2-3.4 billion. Even at the bottom end of the range, should see average revenue growth of just under 12 per cent.

Profits will depend on maintaining margins - its target is 27 per cent - and keeping a lid on inventory. The company's move this week to can its mid-range 667MHz Power Mac G4 is clearly part of that process: it forces buyers to opt for the higher-end model that they might otherwise have passed over because of the higher price. Equally, as its direct sales business grows - AppleStore sales accounted for a third of the total shipments this quarter - more of the profits per sale end up in Apple's coffers rather than its resellers'.

Sales of high-margin items like MacOS X should help too. Apple revenues were increased by $19 million thanks to one week's MacOS X sales during the quarter. ®

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