Steve Jobs is a happy man. The interim chief executive of Apple Computer made that clear during his keynote address on the opening day of Macworld in San Francisco when the words "couldn?t be happier" replaced his usual "insanely great" catchphrase.
Jobs had something to be happy about. 12 months ago on the same stage he had played a clearly irritated second fiddle to then CEO Gil Amelio whose management style was doing little to stem Apple?s enormous losses. One year on and Jobs was the guy in charge who got to announce Apple?s first profitable quarter in three years.
At the end of an otherwise remarkably lacklustre 90-minute speech, Jobs - reknowned as one of the great marketeers of the IT industry - savoured his moment of drama when he announced: "Oh, I forgot to tell you one last thing. All the guys at Apple have been burning the midnight oil.?
He went on to reveal that for its first quarter ended 31 December 1997, Apple will report a profit of around $45 million on revenues of approximately $1.6 billion. This compares with a loss of $120 million on revenues of $2.1 billion for the same period last year.
Detailed figures will not be available until 14 January when the official announcement will be made, but according to Fred Anderson, Apple?s chief financial officer, there is a simple explanation for the turnaround. "We had stable revenues and higher gross margins", he said, highlighting in particular the higher than expected shipments of Apple?s new G3 series of machines and reduced operating costs.
Wall Street - which had been expecting a loss of around six cents a share - seized upon the good result, a marked contrast to the stream of gloomy news coming out of the hi-tech sector in recent weeks. Apple stock ceased trading briefly while the announcement was made, but upon resumption shot up nearly 30 per cent to $20.5 as 13 million shares changed hands by lunchtime.
Whether this return to profitability can be sustained remains to be seen. Anderson would not be drawn, prefering to stick to the rehearsed PR party line: "We're out of the business of predicting profitability, and in the business of delivering profitability.?
But Jobs struck a note of caution even as he revelled in the audience?s applause, reminding them that the second quarter has traditionally been the company?s weakest in recent years.
The results surprise was the only big news in what was otherwise a low key address. Jobs, dressed decidedly down in a battered leather jacket and jeans, ambled through a rerun of the announcements made at the 10 November Apple Event before introducing a series of demos.
He updated his audience on the success of some of those announcements. The setting up of Apple ?stores within stores? in 57 branches of retailer CompUSA across the country has resulted in Mac sales accounting for 14% of total sales in December, up from three per cent in October.
Mitch Manditch, vice president of worldwide sales, commented later that the in-store stores were boosting Apple?s brand. "We're also seeing that the display of Apple hardware in conjunction with software is making a total-solution buying experience for our customers," he said.
Meanwhile the online Apple Store launched at the November event has so far clocked up sales in the region of $150 million. That?s less than 10% of total sales, but Manditch said the site was contributing in other ways. ?We have seen that shoppers come to the store and configure systems and find out more about the products,? he explained. "Then they actually go to their retailers and place the order."
Jobs cheerfully admitted to Apple?s latest example of inaccurate predictions. "We forecast we would sell 50,000 G3 machines" in the first quarter. We were wrong," he said, revealing that the company has actually shipped more than 130,000 systems in just 51 days. This, according to Jobs, means the G3 machines already account for one third of the company?s total systems sales.
Overall sales were encouraging for the company, if not quite on target yet. "We were close to plan in the first quarter," said Manditch. "We were slightly off, but not by much."
Europe performed particularly well and North America was sound, he added, but the Asian economic crisis appears to have claimed another victim. Sales in that region fell short of target by between 13 per cent to 14 per cent. ?It wasn't huge for us, but it did have some level of significance,? he admitted.
Two topics were not touched on and later declared out of bounds to reporters at a post-keynote briefing - not attended by Jobs. These were the unsuccessful search for a new chief executive and the next generation Rhapsody operating system.
According to Manditch the search for a full time replacement for Jobs is still underway, but he confirmed speculation that one of the main problems is finding someone who can work with Jobs. ?We've not quite been able to find a candidate that we think would work with Steve [Jobs] and the board and the executive management team," he admitted.
Anderson supported him, adding that the search team was determined not to compromise and needed to find someone who would go along with the strategies devised by Jobs. "It would be a big mistake for Apple to lower its standards" he insisted.
More startling was the total absence of any reference to Rhapsody in Jobs keynote, a subject which was on the lips of every Apple executive earlier in the year. Avie Tevanian, senior vp of software engineering, said that Rhapsody was still underway, but that Jobs had set out to focus on what is important today, not the future.
This didn?t seem to disturb the Mac faithful, who greeted even the most mundane of Jobs pronouncements with bursts of applause - with one exception. When he announced that Internet Explorer is the new default browser for the Mac, a large portion of the audience hissed, reflecting the booing that greeted the Jobs-engineered alliance with Microsoft forged during the summer.
But Jobs was unrepentant. "You can change it back to Navigator if you want," he told his critics. "But a lot of people want to use IE. We think it?s a good browser.?
The anti-Microsoft lobby fell quieter when Ben Waldman, general manager of Microsoft?s Macintosh business unit, came on stage to debut Microsoft Office 98 for Mac which includes several Mac-only features. "We understand that Macintosh users are different," he said to great applause. ?Finally, we understand that. Office 98 is not a port of a Windows product. It is a Macintosh product from the ground up."
Chief among the Mac-only features is a drag-and-drop installation function, a self-repairing application mechanism to reinstall vital extensions which end up in the trash can and support for Mac OS 8's contextual menus, QuickTime 3.0 and QuickTime VR.
Quicktime itself has been given a makeover with version 3.0 with a number of new features, including a video compressor-decompressor from Sorenson Vision, new streaming capabilities, support for the Digital Video DV) format, and new audio technologies.
From a business perspective, the big change was announced by Jobs who declared that Apple would no longer be a philanthropist where Quicktime is concerned. In a bid to produce some revenue from the software, Apple will now charge $29.95 for a "professional" version of QuickTime.
This version will have authoring capabilities and other features that the free,"playback only" version will not. These professional features wil include the ability to ?drag and drop? a video clip on top of another clip and automatically splice the two clips together for playback.
Overall it was a creditable performance by Jobs, if hardly one of the most exciting. But it was not the unrehearsed ramble that last year?s performance by Gil Amelio was and it did contain one item of news that might yet prove a milestone in Apple?s recovery. "We're starting to see some results...Apple is coming back," declared Jobs. "We're going to look to deliver a result you can be proud of."
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