Apple's profit buoyed by surging iMac sales

First-quarter earnings more than double for fifth straight gain

January 14, 1999|By BLOOMBERG NEWS

CUPERTINO, Calif. -- Apple Computer Inc. reported yesterday that its fiscal first-quarter profit more than doubled, beating expectations, as surging sales of -iMac PCs sparked a fifth straight quarterly profit.

Excluding a gain for the quarter that ended Dec. 26, the company's profit rose to $123 million, or 78 cents a share, from $47 million, or 33 cents, in the year-earlier quarter. Sales at the No. 7 computer maker rose 8.4 percent to $1.71 billion from $1.58 billion.

Apple, which has lost market share for much of the decade, is turning around under interim chief executive Steve Jobs' push to cut costs and create new products like the iMac, unveiled in August. First-quarter iMac sales totaled 519,000 and helped Apple produce its first year-over-year revenue increase since the first quarter of 1996.

"Apple right now is really on a roll and is in the middle of major momentum," said Prince Alwaleed bin Talal of Saudi Arabia, who owns about 5 percent of Apple's shares. "The important thing is they have to keep it up."

Cupertino, Calif.-based Apple's shares rose 37.5 cents, to $46.50. The earnings were released after the close of U.S. trading.

The company was expected to earn 70 cents a share, the average estimate of analysts polled by First Call Corp.

Fred Anderson, Apple chief financial officer, said the company expects unit shipments and sales in the second quarter to fall from first-quarter levels, though they will be higher than in the year-ago second quarter. Sales in the second quarter of 1998 were $1.41 billion and unit shipments were 650,000.

Apple said its unit shipments rose 49 percent in the first quarter, led by iMacs, and inventory fell to just two days' worth of product.

"The iMac has done very well, and demand for the G3 [desktop computer] was good," said analyst Bill Milton of Brown Brothers Harriman, who rates Apple's stock "neutral."

Apple has shipped 800,000 -iMacs since the machines were introduced Aug. 15. The company introduced faster -iMacs this month that come in six colors and sell for $1,199.

Apple said its gross margin widened to 28.2 percent from 22.4 percent a year ago. Gross margin is the percentage of sales remaining after production costs are subtracted.

Including a $29 million gain from the sale of 2.9 million shares of ARM Holdings PLC, Apple reported net income for its fiscal first quarter of $152 million, or 95 cents a share.

Pub Date: 1/14/99

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