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Apple a ‘cash machine’ – CFO

Inventory shrinking, cash-pile growing

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Apple is sticking to its previous forecasts of a small increase in Q4 sales and shipments over Q3, accompanied by a slight increase in earnings, CFO Fred Anderson tacitly said yesterday. The company's fourth quarter end on 30 September.

Actually, what he said was: "We give guidance once a quarter and if you don't hear from us, that's good news." No news is good news, in other words. Not that that stopped Anderson from bullishly expounding on the company's financial position.

Three key areas will define Apple's economics over the coming months: inventory, cash and Mac OS X. The company's Unix-based operating system will be a "huge growth driver next year", Anderson predicted, as the arrival of native applications lead users to upgrade their hardware for the OS or purchase the shrink-wrapped package.

Given the current state of the PC market, Apple can't rely to heavily on high levels of growth in hardware sales. Instead, it has focused on cost reductions, and keeping inventory down. Anderson claimed Apple currently has less than four week' inventory in its channel, which will be cut to just two days' worth - valued at $19 million - by the end of the quarter. That's bang on target, Anderson said.

The company's cash-pile continues to grow, meanwhile, by about $200 million this financial year, which ends on 30 September. It already has around $4.2 billion in the bank. "Apple, quite frankly, has been a cash machine," said Anderson. Around $300 million cash will be used to buy Apple stock, he added.

Anderson restated the company's claim that its retail operation will break even during the Christmas quarter - the first of the company's 2002 fiscal year - and make a "slight profit" by the end of 2002.

During Q3, Apple made a profit of $61 million (17 cents a share) on sales of $1.475 billion, down 19 per cent on Q3 2000. ®

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