InformationWeek

Monday, October 12, 1998

Apple Set To Announce Profitable Year

(10/12/98 3:20 a.m. ET)
By Reuters

SAN FRANCISCO -- Apple is set to report its first profitable year since 1995, and the computer maker said it plans to hold a briefing this week to tout the news and announce new products, industry analysts said.

In an unusual move, co-founder and interim CEO Steve Jobs will host a news conference Wednesday while the stock market is open to report fourth quarter earnings, give an update on the hot-selling iMac computer, and roll out the next version of the Macintosh operating system.

Apple (company profile), like many West Coast technology companies, usually reports earnings after the close of the United States stock market.

"I don't think they are doing this to report a loss," said Richard Doherty, director of Envisioneering Group, a consultancy in Seaford, N.Y. "I think they are going to show they have had the most successful computer launch in history."

Apple has reported three consecutive profitable quarters, fueled largely by iMac, and analysts said they expect earnings of 49 cents a share for the latest quarter and $1.71 a share for its fiscal year ended last month, according to First Call, which tracks estimates.

Apple's last profitable year was fiscal 1995, when it earned more than $400 million on sales of $11 billion.

But the company that helped popularize the PC lost $1.8 billion its past two fiscal years as it struggled to cut costs and refocus its products while customers defected to competitors.

Jobs, who has been back at Apple as interim CEO for just over a year, will take center stage at Flint Center, near the company's Cupertino, Calif., headquarters, a venue Apple has used before for special events.

In May, Jobs surprised the crowd by introducing the iMac, Apple's first new consumer product in several years, at the center, where the original Mac machine was rolled out.

Since it began shipping in August, the innovative iMac, priced at $1,299, has sold briskly. Apple shipped a record 150,000 units to retailers, many of whom sold out quickly and reordered.

"I am expecting reasonably positive news out of these guys," said Lou Mazzucchelli, an analyst with Gerard Klauer Mattison & Co. "The company is really hitting on all cylinders in terms of their strategy."

Apple said it will release data on who is buying iMacs, which many analysts are watching carefully. The data should show many first-time computer buyers and some converts from Windows-based PCs.

"Everything I have seen has been bullish, and I suspect that will be the case," said James Staten, an analyst with Gartner Group's Dataquest, in San Jose, Calif. Dataquest is still in the process of compiling its third quarter PC market data.

Preliminary market research data from one San Francisco Bay Area retailer, ComputerWare, indicated in August that nearly 15 percent of iMac buyers were buying their first computer and another 13 percent were replacing a Windows-based PC.

"The larger question for the stock is whether these are just the faithful, buying their first Mac in a few years" or new users, said Mark Specker, a SoundView Financial analyst.

Apple will also roll out the latest version of the Mac OS, Mac OS 8.5, which includes a feature called Sherlock that Apple demonstrated this summer.

Sherlock is an integrated part of the OS that can perform narrower Internet searches without using a browser and combs through the main search engines, including AltaVista, Excite, Infoseek and HotBot, at the same time. Sherlock can also search documents on a hard drive.

"It has a lot of personal productivity features," said Doherty of Envisioneering. "Sherlock will allow you to find things faster. It's going to be a huge success."

Other new features in Mac OS 8.5 include faster networking performance and automation of printing and other simple tasks.

Apple stock jumped $4.31 to $35.125 on the Nasdaq Composite Index Friday, part of a broader rebound in technology issues.

Copyright 1998 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall be not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

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