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Apple Denies Merger Talks, Expects Big Quarterly Loss

Computers: In first statement since CEO was fired, firm responds to rumors, saying they are 'destabilizing' its business.

February 09, 1996|From Times Staff and Wire Reports

SAN FRANCISCO — Indicating that continuing speculation over a possible sale of the company is seriously damaging sales, Apple Computer Inc. said Thursday that it is not in merger discussions with any party and that it expects to report a large loss for the current quarter.

In its first public statement since Chief Executive Michael Spindler was fired Feb. 2 and replaced by former National Semiconductor Corp. chief Gilbert F. Amelio, the troubled Cupertino, Calif.-based computer maker said it was making an exception to a company policy of not commenting on rumors because they were "destabilizing" its business.

The company also said it expects to report a loss for the current quarter that will "significantly exceed" the $69-million operating loss reported for the quarter ended in December. Apple said previously that it would take a charge of at least $125 million in the current quarter to cover the costs of 1,300 layoffs announced recently and for inventory write-offs.

Apple has been in on-and-off merger discussions with Mountain View, Calif.-based Sun Microsystems Inc., and several weeks ago the two sides were reported to be on the verge of a deal under which Sun would acquire Apple in a stock swap. But they were unable to agree on price. When Apple ousted Spindler last week, most believed the merger discussions were over, but sources said discussions were going on earlier this week.

Industry analysts said Apple could still form an alliance with Sun or another computer maker. Even if it does not, Amelio is clearly moving to refocus attention on its business operations.

Amelio, who steered National Semiconductor back to financial health before joining Apple, said in the press release Thursday, "I want to emphasize my strong belief, despite the obvious disappointment of our performance in the first and second quarters, that the foundations of our business are sound."

"We will continue building our strengths in the education, home, business and other market segments," he said, noting that Apple is taking steps to boost profit and performance.

"I fully expect that our customers' grandchildren will be buying Apple products," Amelio said.

Apple stumbled badly last year when it underestimated demand for its popular new Power Macintosh computers, a move that contributed to the loss in the December quarter and has bloated inventories of low-end Mac Performa machines.

The problems have dragged Apple's stock down from a high of about $50 in the last year to near $28. The stock slid further Thursday, losing 37.5 cents to $27.875 on Nasdaq.

In its statement, Apple said it expects to take charges in the current quarter related to previously announced moves to reduce its inventory. It said further restructuring charges may be necessary.

Analysts said Amelio is likely to sell assets and might close plants or take other steps to resolve the problems at the company.

"We have all seen this movie before," said David Wu at Chicago Corp. "Act I is the new CEO comes in, Act II is the neutron bomb over Cupertino, Act III is the balance sheet suddenly got better, and Act IV is the CEO made a lot of money in stock options."

But Apple will be harder to turn around than International Business Machines Corp. because of its isolated place in the PC industry, Wu said.

In another effort to put its problems behind it, Apple took out full-page ads in major newspapers, including the Los Angeles Times, stating its strengths and its commitment to the computer business.

The company is scheduled to report results for its second fiscal quarter in April.

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