Apple Computer is tasting sweet success with projected first quarter profits of over $45 million, but analysts believe it must crack the low cost consumer market to sustain its turnaround.
The expected profits, on revenue of $1.58 billion, compare with the sour taste of a loss of $120 million on revenue of $2.1 billion for the year earlier quarter.
The actual figures will be reported next Wednesday but the estimated profits indicate that Apple has managed to stop the rot of last year's financial disasters. US communications director Katie Cotton attributes this to four major factors - ?the success of our G3 systems, our relationship with CompuUSA, the build to manufacture process and the success of our online store.?
Cotton said they were all important contributors to the upturn but highlighted the G3 product, which shipped 133,000 units in the quarter, well ahead of Apple?s own estimates of 80,000. ?It was,? says Cotton ?our most successful launch in history.?
Commenting on the success of the 'store within a store' deal with CompUSA - which gives Apple dedicated space in 57 of the computer retailer?s superstores - Cotton said: ?Sales of Apple products were only three per cent of all CompUSA business before the stores opened, but that jumped to 14 per cent after the outfitting."
CompUSA is funding the full implementation with Apple working on the design. ?We expect all the stores to be fitted by February,? said Cotton. A similar scheme is expected in the UK (see separate story).
Cotton is proud of the build to order process, which ties in with the online store. ?500 configurations are offered through our online store. You can order customised systems to suit your needs," she said.
Louis Mazzucchelli, an analyst at Gerard Klauer Mattison, believes that this development makes Apple more capable of reacting to industry demands quickly, which should be a key factor to sustain continued success. ?Historically, Apple couldn?t deliver quickly but now it is streamlined and able to satisfy demand with its build to order system - which is the way most of the industry is going.?
But for continued profitability, Mazzucchelli says the big question is whether Apple can develop an entry level machine that is priced low. ?42 per cent of consumer computers are sold under $1,000 - there is nothing to stop Apple from building one as cheap. That way they can start rebuilding their consumer franchise now that they have established they can be profitable at $6.5 billion.?
Apple plans to contine with its streamlining policy. ?In general the company is concentrating on what it does best - the core markets of design, publishing and education,? says Cotton, ?Apple is working really hard to focus on its priorities, not profitability.?
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