A week after MacWorld and the announcement of Apple's bold plans for a new operating system (see last week's PC Week), the company has reported devastating first-quarter results for 1997.
For the first fiscal quarter 1997 which ended December 27 1996, the company reported a net loss of $120 million (#75 million) compared to a loss of $69 million in the same period the year before. Revenues fell by 8% from the fourth quarter 1996 results delivered last September, to stand at $2.1 billion. Unit sales fell 1% over the same period.
The results catapult Apple back into the red after what appeared to be a promising fourth quarter in 1996 and a turnaround in the company's fortunes when it announced a net profit of $25 million.
This disappointment to Apple has been put down to a shortfall in sales of Performa machines in the consumer market and a disastrous Christmas season. According to Apple, the weakness in sales of Performa machines resulted in the company having to price aggressively, thus affecting gross margins.
In a move to fuel the company's return to profitability, Apple has said it is planning additional restructuring during the second quarter of 1997 with a goal of reducing its break-even point to $8 billion.
Gil Amelio, Apple chairman and CEO, said that in spite of the loss Apple's three-year transformation plan was sound and stressed that the company remained focussed on executing it. He added the company expects to ship some "extremely innovative new products in 1997", ranging from portable devices to fast desktop systems. "We embark upon Apple's third decade with renewed enthusiasm," he added. "We look forward to working with our developers, customers and industry colleagues to proliferate Apple's legacy of vision and technological excellence."
Forrester Research believes Apple is in a downward spiral which has now been accelerated by the acquisition of NeXT. It says that, rather than fighting the long-lost PC operating system battle, Apple should refocus on opportunities of tomorrow. These include areas such as Java, Nintendo 64 and high definition TV which blur the line between computing and entertainment devices.
A Forrester Research briefing document, entitled End of the road for Apple's Mac, concluded: "Apple's last chance is to leverage de facto Internet standards to create alternative computing devices, as it has tentatively done with the eMate."
APPLE: THINGS ARE LOOKING UP
Give me five - why Apple thinks things aren't so bad
1 Its fundamental strategy remains on track
2 Its financial position remains strong, with $1.8 billion in cash
3 The 1Q 97 results were the result of 'specific issues' such as weak demand
4 It's acquired NeXT and has a long-term future
5 NeXT's technology will help Apple to differentiate itself.
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