Apple turned out surprising financial results this week, posting a $25 million profit for the fourth quarter after what has been, to date, a disastrous financial year.
Fred Anderson, chief financial officer at Apple, told analysts earlier this month that Apple could regain profitability by December, but analysts were not expecting it to go into the black as early as the September quarter. Most were predicting a loss of 30 cents a share for the period.
However, Apple faces many serious long term challenges, notably declining year-to-year sales as its computers come under ever-increasing pressure from Wintel PCs. But the company claims it has achieved many of the most critical goals of its transformation, and while not promising a profit in the current quarter, remains confident about reaching sustainable profitability in the second quarter of 1997, ending in March.
Sales grew during this quarter and over the past two quarters the company?s operating expenses have been significantly reduced.
Analysts said Apple?s quarterly profit wasn?t manufactured at the expense of long-term growth but was part of a genuine turnaround. ?A lot of things are clicking in the right direction,? said Richard Schutte of Goldman, Sachs. ?Their franchise has not eroded the way many people thought it had. And their strategy of selling tightly focused products that people will pay a premium for is working well.?
The company reported net income for the fourth quarter ended Sept 27 of $25 million, or 20 cents a share, on sales of $2.32 billion. Some of the profit was, in effect, reclaimed from a $207 million restructuring charge from earlier in the year, which the company now says was bigger than necessary. Without that adjustment, Apple?s profit would have been $8 million, or six cents a share.
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