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Apple, Digital Report Hefty Gains in Income as IBM's Share Shrinks

October 15, 1987|VICTOR F. ZONANA | Times Staff Writer

Two leading computer makers, Apple Computer and Digital Equipment, reported sharply higher quarterly earnings on Wednesday, a day after industry leader IBM disappointed many analysts with its third-quarter earnings report.

Apple, the Cupertino, Calif.-based maker of personal computers, said net income in its fourth fiscal quarter more than doubled, to $71.7 million from $32.9 million in the year-ago period. Sales jumped 54% to $786.4 million, as the once-scorned Macintosh line of computers won wide acceptance for desktop publishing and other business applications.

"Our new products are shipping in record numbers," said John Sculley, chairman and chief executive. "We have now completed the repositioning of Apple and enter fiscal 1988 with strong momentum and a full complement of new products."

Analyst Bruce Lupatkin of the San Francisco-based investment firm Hambrecht & Quist said the results were encouraging. "Apple continues to hold its dominant position in the educational market and is gaining share in the business market," he said.

Based on Wednesday's report, Lupatkin is forecasting a 25% to 30% gain in revenue for Apple in fiscal 1988, and an even greater increase in net income due to a lower tax rate.

For all of fiscal 1987, Apple's net income rose 41%, to $217 million, on a 40% sales gain, to $2.66 billion.

Apple has benefited from a surging market for personal computers. The market has been driven by lower prices and technological advances.

Apple's new Macintosh models SE and II, for example, provide the Mac's trademark graphic capabilities but allow users to add boards that let the machines communicate with--and even emulate--IBM personal computers. Apple also strengthened its product line in fiscal 1987 by introducing the Apple II GS and advanced networking products for the Macintosh.

Digital Equipment, whose midrange computer systems continue to take market share away from IBM, posted a 48% surge in net income, to $269.9 million, for its first quarter ended Sept. 26. Revenue climbed 24% to $2.53 billion.

The quarter's gains came on top of an 84% rise in income and a 24% revenue increase for fiscal 1987.

Kenneth H. Olsen, president of the Maynard, Mass.-based company, said "overseas business remained firm, while orders from customers in the U.S. accelerated somewhat."

James Osterhoff, vice president for finance, said the company is investing aggressively to accommodate growth.

"DEC continues to have a hot hand," said David Wu, an analyst with S. G. Warburg in New York. "The results were right in line with expectations--and the expectations were for a very good quarter."

Wu said Apple and Digital were able to turn in favorable earnings reports because of strong demand in their respective markets for PCs and minicomputers, and because their product lines are strong.

However, Apple and Digital were unable to buck the stock market decline Wednesday. Apple's stock fell $1.25 to $53.25, and Digital closed at $183.75, down $5.25.

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