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January 3, 1997updated 05 Sep 2016 12:35pm

APPLE SPELLS OUT IT’S DIRE SITUATION IS IN SEC FILING

By CBR Staff Writer

Apple Computer Inc is a company in deep trouble, and just how deep is made clear in a filing it made with the Securities & Exchange Commission at the time of its announcement of the acquisition of NeXT Software Inc. In the company’s fiscal fourth quarter to September, its worldwide market share slumped to 5.4% from 8.7% in the fiscal fourth quarter of 1995. Worse, its market share in the US plummeted to 7.3% from 13.2% a year earlier. The company puts that dismal performance down to customer worries about its financial condition, future prospects, and where it is going – and the acquisition of NeXT is intended to answer some of those concerns. Upwards compatibility as it moves to a new 32-bit operating system is a particular concern, and the company concedes that its essential focus on increased functionality could be at the expense of some backwards compatibility, and that this could lead some existing customers to defect. The company’s assessment of its straitened means and condition is stark. It admits in the filing that, going forward, it will have less direct control over some of its research and development efforts, and that its ability to create innovative new products may be reduced. And, underlining the hole out of which it is attempting to climb, fiscal 1996 gross margin plummeted to a vestigial 9.8% from 25.8% in 1995 – and this from a company that used to live off the fat of 40% plus margins that sometimes strayed over the 50% mark. Among the factors it blamed for the vanishing margins was significantly lower than expected demand for many of its products, primarily entry-level personal computers.

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