Analysts responses have been mixed to Apple?s first profit in three years and to a set of year end financial results that were a couple of points above expectations.
For its fourth quarter, ending 25 September, 1998, the hardware supplier turned in flat revenues of $1.6 billion, which showed a marked improvement on the previous year?s dwindling sales. It also posted profits of $106 million compared to losses of $161 million in the same quarter last year.
For the year, Apple?s turnover fell to $5.9 billion from $7.1 billion, however, while it generated profits of $309 million compared with losses of $1 billion last time.
Fred Anderson, Apple?s chief financial officer, said: "This is the first time since December 1993 that we?ve had growth ahead of industry rates of 12-15 per cent. IMac was the obvious driver for this, but we also had growth in our professional desktop and Powerbook lines. Our gross margins were up to 26.8 per cent by increasing efficiency in our supply chain operations, but they will decline next quarter due to iMac [the company?s new low-cost range of PCs]."
He continued that unit shipments had increased 28 per cent year-on-year across the board and inventory had dropped to $78 million or six days, which, he claimed, was even better than direct PC manufacturer Dell?s performance at eight days.
"We expect revenue and unit growth in December due to iMac and during 1999, our aim is to grow revenues above the industry rate. We also expect significant revenues from version 8.5 of the Mac OS in the fourth quarter because it?s a significant upgrade with the inclusion of our Sherlock search techology," Anderson added.
But James Staten, analyst at Dataquest, said he was reserving judgement on Apple and whether the company could move into growth mode.
"Revenue increases were not the goal of this year, profitability was. But this fourth calendar quarter will really determine if Apple is back on a growth curve. It?s been in recovery mode for some time, but growth is still not there and we?ll be looking for that. If it does not grow, the window of opportunity to do so is shrinking and that will cause Apple problems," he continued.
He added that the margins generated from Apple?s iMac product were lower than its more expensive G3 desktop family, but the company?s figures appeared to indicate that iMac had not increased the number of total Apple buyers, but had simply diverted customers away from G3.
Rob Enderle, Giga Group?s director of desktop and mobile technology, was more upbeat, however.
"Apple?s results were very good and beat expectations by a couple of points. This shows it still has the power of innovation and this is Apple being Apple again. I think the growth is potentially sustainable, although we?ll see how well it does through 1999 and the Year 2000 crisis. If it can continue on this path, it may be able to sustain growth," he said.
He continued that while margin pressure did present Apple with a problem, other vendors in the PC market were faced with the same situation, and success would depend on how well the company could bring its costs into line with revenues.
However, market growth will be "killed" in the fourth quarter of next year and damaged in the third due to the Year 2000 issue, he added, which means that Apple and others will be forced to eat into their cash reserves for working capital.
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