Apple Computer Inc chief executive Gil Amelio put a brave face on the company’s year-end results, released yesterday, saying the question was not will Apple survive? but How will Apple establish leadership in the emerging digital era of the Internet and multimedia? Or more like will it ever, and how do you measure such a thing anyhow? The company actually made money in the fourth quarter, although the $25m net profits declared would have been about $8m were it not for reduced operating expenses as a result of a $28m adjustment from the period before. Revenues in the quarter fell a hefty 23% to $2.32bn. Amelio said the company was still on course for a return to sustainable profitability by the second calendar quarter of next year. But how big Apple is by then is anybody’s guess. It is now a company with revenues less than $10bn. Compaq Computer Corp, on the other hand looks heading towards slightly less than $20bn this year. For the year to September 30, Apple turned in net losses of $816m, against profits of $424m a year ago. After-tax inventory write-downs of $388m in the second quarter, net restructuring charges of $113m and after-tax warranty and related expenses some $126n higher than Apple said they would normally have been all contributed to the losses. But losses at the operating level were still $1.38bn, against operating profits of $684m the previous time. Revenues for the year were down 11% at $9.83bn. As the operating expenses came down in the quarter, gross margins were up to 22% against the previous quarter’s 18.5%, but it should be remembered that it was a one-off gain that helped bring that about. Although Apple said it was also due to reduced administrative expenses – less people – increased manufacturing efficiency, and sales of previously reserved inventory. In fact, inventory has been reduced by about $400m since June, said the company. One light at the end of this particular tunnel is the cash flow and money in the bank. Cash flow was positive to the tune of $410m from operations in the quarter, and cash and equivalents stood at $1.55bn on September 30, double what it was the same day last year. The company expects revenues in the first quarter to be roughly the same as the fourth, with year-on year growth slated for the second quarter. It says it can hold gross margins about 20% and operating expenses below $500m a quarter. Apple still has a lot of friends – and predators – seemingly willing to forgive it almost anything, both in the technology field and among analysts and investors – the shares rose gradually in after-hours trading. But the next slew of products, including new PowerBooks due this month and next year and a targeting of the home and education markets in general means that Apple is not trying to hit its previous heights again, just hope it can be smaller, leaner and profitable, which will make it all the more attractive.
