Apple?s return to profit in the first quarter of its 1998 fiscal year came on the back of a year of tumbling sales and marketshare in 1997, according to stock market documents filed by the company.
In its year end 10k statement filed with the US Securities and Exchange Commission, Apple reveals how bad 1997 was for the troubled company. Global market share fell as low as 3.6 per cent in the fourth quarter ended 30 September, 1997, down from 5.7 per cent the previous year. In its domestic US market, the decline was from 7.4 per cent to 5.6 per cent.
"During 1997, the Company continued to experience declines in net sales, units shipped and share of the personal computer market compared to prior years," confirms the 10K statement, which goes on to blame decline in demand and "intense price competition throughout the industry" for the decline.
It goes on to warn that things are likely to remain shaky for some time. "The Company believes that net sales will be below the level of the prior year's comparable periods through at least the second fiscal quarter of 1998, if not longer," it cautions.
Total Macintosh and peripheral unit sales decreased 27 per cent and 33 per cent, respectively, during 1997, compared with 1996, a fall which is blamed on a general decline in worldwide demand for Apple products. "The Company believes this was due principally to continued customer concerns regarding the Company's strategic direction, financial condition and future prospects, and the viability of the Macintosh platform, and to competitive pressures in the marketplace," suggests the filing.
The average aggregate revenue per Macintosh also decreased in 1997 compared with 1996 following continued pricing actions, such as increased rebates across most product lines. But the average aggregate revenue per peripheral unit did not change year on year.
Again the pressure is likely to remain on Apple?s results. "The average aggregate revenue per Macintosh computer unit and per peripheral unit will remain under significant downward pressure due to a variety of factors, including industrywide pricing pressures, increased competition, and the need to stimulate demand for the Company's products," acknowledges the statement.
Gross margin increased from 10 to 19 per cent of sales during 1997 compared to 1996, primarily as a result of a $616 million charge in the second quarter of 1996 that related principally to the write-down of certain inventory, as well as to the cost of cancelling excess component orders. This was foreced on the company by significantly lower than expected demand for its entry level Power Macintoshes.
In a straight quarter by quarter comparison, sales in the fourth quarter of 1997 decreased 30 per cent against the comparable period in 1996. Total Macintosh sales and peripheral unit sales decreased by 30 and 32 per cent, respectively while the average aggregate revenue per Macintosh unit decreased as did that of peripheral products.
The decline is also reflected in a quarter by quarter comparison with sales in the last three months of 1997 down by 7% on the previous quarter. Total Macintosh sales were down eight per cent, but in the US domestic sales produced some good news with a 15 per cent increase in the fourth quarter.
The company also reports success in clearing some of the backlog in its reseller channels. The backlog of unfilled orders decreased to approximately $230 million on 28 November 1997 from approximately $563 million at 29 November 1996. What backlog remained consisted primarily of higher end Power Macintosh products and not the Powerbooks that were there twelve months earlier.
But it notes that it could be in for a difficult time ahead. "Uncertainty over demand for the Company's products may continue to cause resellers to reduce their ordering and marketing of the Company's products," it argues. "In addition, the Company has in the past and may in the future experience delays in ordering by resellers in light of uncertain demand for the Company's products."
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