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RealTime IT News

Apple Facing First Loss in Three Years

For the first time in three years, Apple is looking ahead to a losing quarter.

The computer maker said Tuesday that poor sales in October and November will have a chilling effect on revenues and earnings for the quarter ending Dec. 30. Apple expects to report a net loss of $225 to $250 million on revenues of about $1 billion on Jan. 17, 2001.

Apple said the $600 million revenue shortfall from previous expectations is due to lower than expected channel sell-through and unplanned sales promotions and pricing actions. It added that the net loss is the result of the revenue shortfall and cancellation charges related to decreases in forecasted component purchases for current products.

Apple Chief Executive Officer Steve Jobs pulled no punches in the conference call that accompanied the results warning. Jobs said that industry-wide declining computer sales and an overall economic slowdown were part of the problem, but he also acknowledged that Apple itself bears blame.

"We were simply not prepared to be hit by three major problems at the same time," he said, referring to the slowing sales and economic slowdown as well as Apple's internal mistakes. He noted that Apple's megahertz gap -- its computers simply don't have the zip that competitors boast -- is part of the problem, adding that the company is very aware of the problem and will ship speedier computers soon. He also said missteps in education sales caused the company to slip behind Dell Computer in that area. Finally, he said Apple made a mistake in not shipping computers with CD-RW drives.

"Apple completely missed the boat on CD-Rewrite drives," he said. "We just blew this one. It will be fixed soon."

Jobs also noted that delayed purchases due to consumers looking ahead to the shipment of Mac OS X could be part of the mix. The company expects to ship the new operating system in January, and Jobs added, "I am more excited about our future plans and products than I've ever been. We will soon ship the world's most advanced yet easy-to-use operating system."

Though Apple Chief Financial Officer Fred Anderson said times will continue to be tough in the computer industry -- "We now believe that the market slowdown is likely to be more than a one-quarter phenomenon" -- both he and Jobs said they were confident that Apple would return to sustained profitability in the next quarter.

"We are confident that Apple can weather this cycle and possibly come out the other end stronger," Jobs said. "We're on to the next quarter."

Apple was one of the first computer vendors to warn about softening sales when it voiced its concerns on Sept. 28. Just prior to the announcement, Apple shares were trading at about $54. On Oct. 18, the company confirmed that its fiscal fourth quarter would be worse than initially anticipated and continued to guide investors to lower expectations for fiscal 2001; Anderson added to that Tuesday, "In light of the lower results anticipated for the December quarter, we now expect revenues for fiscal 2001 to be in the $6 to $6.5 billion range.

On Tuesday, Apple's stock close at $17 a share and it is expected to open at around $13 on Wednesday.