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Apple's Strong Quarterly Profit Startles Analysts

July 16, 1998|From Times Wire Services

Apple Computer Inc. surprised Wall Street on Wednesday with a much-stronger-than-expected profit for the latest quarter, marking its third consecutive quarterly profit.

The revived Apple, which has bounced back from steep losses last year, credited strong sales of its G3 Power Macintoshes and PowerBook notebook computers.

The Cupertino-based company posted a profit of $101 million, or 65 cents per share on a diluted basis, for its fiscal third quarter ended June 26, contrasted with a loss of $56 million, or 44 cents, a year ago.

Excluding one-time items, Apple posted a profit in the latest quarter of $75 million, or 50 cents per share--well above Wall Street estimates of 33 cents a share.

Revenue fell to $1.4 billion from $1.7 billion. The latest quarter included a $26-million net gain from nonrecurring items, Apple said. Gross profit margins were 25.7%, up from 24.8% in the quarter ended in March.

Apple interim Chief Executive Steve Jobs said the company sold a record number of Power Macintosh G3 computers during the quarter.

"'Apple earned its highest profits in years, and we ended the quarter with the lowest inventory level among the major PC players," Jobs said.

Apple believes that the iMac, a sleek white-and-turquoise machine priced at $1,299 and loaded with dozens of industrially designed features, will revive the magic of the early Macintosh line among consumers. It is scheduled to ship in mid-August.

Apple Chief Financial Officer Fred Anderson said in the statement that with nearly $2 billion in cash and short-term investments, "we believe we have the infrastructure in place to support our upcoming reentry into the consumer market."

Anderson said in a brief interview that he expects fourth-quarter revenue and unit shipments to be up sequentially from the third quarter.

Apple's stock gained $1 to close at $34.44 on Nasdaq. The earnings announcement was made after the close of official trading.

At a Glance:

Read-Rite Corp., which makes components for computer disk drives, reported a fiscal third-quarter loss and said it will close an overseas plant. The Milpitas company also said that as a result of its latest loss, it is in violation of its $200-million credit facility and is discussing "necessary amendments" with its lender.

Read-Rite reported an operating loss of $43.4 million and a net loss of $137.2 million, or $2.82 per share, after including restructuring charges. That contrasts with a profit of $31.2 million, or 64 cents per diluted share, in the year-ago quarter. Sales fell to $184.3 million from $310.2 million.

In a statement, the company said results were hurt by difficult market conditions throughout the disk drive industry, including product oversupply and severe pricing pressures. It said it will cut about 4,200 jobs, or 18% of its work force, and close its plant in Malaysia amid a protracted slump in the disk drive industry. The company, which makes recording heads used in the drives, said it will consolidate its Malaysia plant into its two others in Thailand and Manila and fire the employees in Malaysia.

@Home Corp. said its second-quarter loss narrowed slightly, in line with analysts' estimates, as the high-speed Internet access provider boosted membership. The Redwood City-based company said its net loss was $11.1 million, or 10 cents a share, compared with a loss of $11.9 million, or 12 cents, in the year-earlier period. Revenue climbed eightfold to $9.2 million from $1 million.

EarthLink Networks Inc. narrowed its loss in the second quarter, beating estimates, as the Internet service provider added 210,000 subscribers, mostly through an alliance with Sprint Corp. The Pasadena company's loss narrowed to $4.8 million, or 39 cents a diluted share, excluding a charge, from a loss of $7.8 million, or 80 cents, a year earlier. Analysts expected the company to lose 55 cents a share. Revenue was $37.6 million, compared with $18.8 million a year ago.

Altera Corp.'s second-quarter profit fell 4%, beating expectations, as the specialty chip maker was helped by strong sales of new products used in the telecommunications industry and elsewhere. Profit before a charge was $38.9 million, or 40 cents a diluted share, compared with $40.5 million, or 41 cents a share, a year ago. Revenue fell 3.2%, to $160.5 million from $165.9 million.

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