DaveNet: Wednesday, April 16, 1997; by Dave Winer.
Apple Q2 Report
Company Recaps Extensive New Product Offerings and Restructuring Progress.
CUPERTINO, Calif. April 16, 1997 Apple Computer, Inc. today announced financial results for the Company's fiscal 1997 second quarter ended March 28, 1997. Revenues for the quarter were $1.6 billion, compared to $2.1 billion in the quarter ended Dec. 27, 1996 and $2.2 billion in the quarter ended March 29, 1996. International sales accounted for 49 percent of total revenues in the current quarter.
As previously indicated, the Company incurred two large charges of a non-operating nature during the quarter. Pursuant to generally accepted accounting principles, the Company recorded a charge of $375 million for the write-off of in-process research and development activity related to its Feb. 4, 1997 acquisition of NeXT Software, Inc.
Additionally, the Company recorded a charge of $155 million to increase reserves to cover the costs of restructuring activities previously announced by the Company on March 14, 1997.
The Company's total loss for the quarter was $708 million, or $(5.64) per share, compared to a net loss of $120 million, or $(.96) per share in the December 1996 quarter and a net loss of $740 million, or $(5.99) per share, in the year-ago quarter. Exclusive of the charges for restructuring and the write-off of in-process research and development, the Company's current quarter loss from operations was $186 million, or $(1.48) per share.
Gross margins for the quarter were 19 percent, compared to 19 percent in the December quarter, and compared to -19 percent (or 9 percent before inventory adjustments) in the year-ago quarter.
Aside from the charges for restructuring and the write-off of in-process research and development, operating expenses for the quarter were $489 million, down $32 million from the December quarter and down $65 million from the year ago quarter.
While the operating results are disappointing, we made significant progress toward executing our strategic plans during the quarter, said Apple chairman and chief executive officer Dr. Gilbert F. Amelio. We've streamlined our organization and narrowed our focus, we're divesting non-core assets, and we're executing a plan to reduce annual operating expenses by $500 million. We've also made great progress toward strengthening Apple's competitive position by introducing several exciting new products to the market, and we've completed the NeXT acquisition, paving the way for delivery of our modern OS, code-named "Rhapsody."
We experienced continued success in asset management during the quarter, said Apple executive vice president and chief financial officer Fred Anderson. Our cash balance at the end of Q2 was in excess of $1.4 billion, our inventories were just over $500 million, and despite the quarter's loss, we generated positive cash flow from operations.
We expect to see rapid improvements in the Company's financial performance as the results of restructuring kick in, added Anderson. We anticipate higher revenues and a significantly reduced operating loss in the Company's third fiscal quarter and continued progress toward our goal of returning to profitability in the fourth quarter.
Apple introduced an array of new products in recent weeks. On April 4, the Company announced the Power Macintosh 6500 series of computers for home and small business customers, including the first 300 MHz system to hit the personal computer market. In addition, the Company introduced two PC-compatible computers the Power Macintosh 7300/180, which includes a 166 MHz Intel Pentium processor; and the Power Macintosh 4400/200, which includes a 133 MHz Cyrix PR166 6x86 processor.
Earlier in the quarter, Apple announced the Macintosh PowerBook 3400 series, featuring the first 240 MHz notebook computer on the market, as well as a new line of Power Macintosh computers for business, professional publishing, and Internet/media authoring.
For education customers, Apple introduced its most comprehensive lineup of new products in 20 years, including the eMateÅ 300, three powerful all-in-one desktop models, two models in a powerful new tower design, and three new solution bundles for secondary schools.
Claris Corporation, Apple's wholly-owned software subsidiary, achieved record-breaking revenues of $70 million during the quarter. Revenue growth was driven in large part by an unprecedented level of operating system upgrades to Mac OS 7.6, introduced in January.
In the last three months, we executed one of the most exciting and comprehensive series of product introductions in the history of Apple, said Apple executive vice president of marketing Guerrino De Luca. These products demonstrate the ongoing innovation at Apple and our commitment to providing distinctive, powerful, easy-to-use products to meet the needs of our customers.
Except for the historical information contained herein, the statements regarding establishing competitive leadership, effecting innovation, continuing focus on certain industry growth areas, reduction of the Company's operating expenses and losses, and the timing of execution of the Company's business plans are forward-looking statements that involve risks and uncertainties. Potential risks and uncertainties include, without limitation, continued competitive pressures in the marketplace; the effect competitive factors and the Company's reaction to them may have on consumer and business buying decisions with respect to the Company's products; the consequences competitive factors and buying decisions may have on current inventory valuations; the Company's ability to successfully integrate the personnel, products and operations of NeXT Software; the ability of the Company to make timely delivery of successful technological innovations to the marketplace; the ability of the Company to successfully resolve its quality issues; the effect of any future losses on the Company's needs for liquidity; the effect of the announced business restructuring on the future performance of the Company, especially the performance of the Company's employees; and the need for any future restructuring, and the effect that it might have on the performance of the Company. More information on potential factors that could affect the Company's financial results is included in the Company's Form 10-K for the 1996 fiscal year and will also be included in the Company's Form 10-Q for the second fiscal quarter, to be filed with the SEC.
Apple Computer, Inc., a recognized innovator in the information industry and leader in multimedia technologies, creates powerful solutions based on easy-to-use personal computers, servers, peripherals, software, handheld computers and Internet content. Headquartered in Cupertino, California, Apple develops, manufactures, licenses and markets solutions, products, technologies and services for business, education, consumer, entertainment, scientific and engineering and government customers in more than 140 countries.
Apple Computer, Inc.
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