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THE CUTTING EDGE/Technology News

Apple's 3rd-Quarter Profit Beats Forecasts

Earnings: The computer maker's iMac model drives gains, as shipments jump in period. Company plans major stock buyback.

July 15, 1999|JOSEPH MENN | TIMES STAFF WRITER

Apple Computer Inc. rode the popular iMac to another strong quarter, reporting profit of $114 million before a one-time gain from the sale of stock.

Earnings for the quarter ended June 26 were 69 cents a share, up from 50 cents a year earlier, excluding nonrecurring gains.

Apple beat Wall Street's consensus estimate of 64 cents.

The company also announced its first share buyback in seven years, with $500 million to be spent over an indefinite period.

"Apple is growing faster than the industry, driven by the continued success of iMac in our consumer and education markets," said Interim Chief Executive Steve Jobs.

It was the seventh straight profitable quarter for the Cupertino, Calif.-based company, which had been all but given up for dead before Jobs' return.

"This is the business model they needed, and this is the business model they built," said J.P. Morgan analyst Daniel Kunstler. "It emphasizes profits and the minimizing of inventory."

Because component costs and retail prices for the finished product fall so rapidly in the computer industry, unsold goods depreciate and tie up capital. Apple said it has one day of inventory on hand, although the supply does back up further in stores.

Apple Chief Financial Officer Fred Anderson reassured some analysts concerned about possible delays in Apple's long-awaited portable computer, which is expected to be unveiled next week. Anderson said that in the three months ending in December, the company will be shipping portables "in volume" and that sales should be up strongly for that quarter from a year earlier.

Revenue for the latest quarter rose 11% from a year earlier, to $1.56 billion. Foreign sales were 45% of the total.

Apple shipped about 480,000 iMacs in the quarter, up from 350,000 in the preceding three months. The iMac continued to gain market share, giving Apple a total 6.7% of the desktop market at retail stores in May, according to analyst Matt Sargent of Ziff-Davis' Infobeads. That's double the share it had a year earlier.

Apple has "shifted from a company focused on serving the workplace to a company focused on the consumer," Sargent said. He said Apple is exploring deals with Internet service providers and hopes to announce something in the next six months.

Other computer companies are teaming with Net firms to provide packaged hardware and Web access, and rebate deals have grabbed the attention of many first-time buyers.

"We believe that Apple will unveil its own branded Internet service, apple.net, and may provide some type of subsidy of its own to consumers," Salomon Smith Barney analyst Richard Gardner said.

Apple shares traded as high as $56.75 in after-hours activity Wednesday, after rising $2.25 to a 52-week high of $55.94 on Nasdaq.

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