Apple Has Record 3rd-Quarter Loss : Earnings: Computer maker’s $188-million deficit is much larger than expected; company earned only $11 million on its operations.
The financial crisis at Apple Computer deepened Thursday as the personal computer maker announced a loss of $188.3 million for its fiscal third quarter, the largest in its 17-year history and far worse than analysts expected.
While the deficit was due to a $320.9-million restructuring charge to cover the 2,500 layoffs the company announced last month, the charge amounted to $198.9 million after taxes--meaning the company earned a paltry $11 million on its operations for the quarter, even though sales rose.
Apple’s announcement came after the stock exchanges closed, but the company’s shares were priced at $31.75 on the Instinet after-hours trading system, off $4 from the market close.
Apple’s problems come against a backdrop of turmoil throughout the personal computer industry, which has been ravaged by an unrelenting price war for more than a year. Dell Computer said Wednesday that it would lose money for the first time ever, and a number of companies have been forced to seek shelter by merging or filing for bankruptcy protection.
Investors Thursday also grew panicky about other computer-related stocks after a networking company and a disk drive firm reported worse than expected results. Shares in Synoptics, Storage Technology, Cisco Systems and a number of other such firms plummeted.
Bruce Lupatkin, an analyst at Hambrecht & Quist in San Francisco, said Apple’s results were “dramatically worse than expected” and that he didn’t expect a turnaround in the immediate future. He attributed the problems to “very poor management execution.”
Apple’s third-quarter loss of $1.63 a share compares to net income of $131.7 million, or $1.07 a share, in the same period a year ago. Revenue was $1.86 billion, compared to $1.74 billion last year.
While there were backlogs on certain Apple products at some dealers during the quarter, Lupatkin said, other dealers had far too much inventory. The company’s costs, meanwhile, were “way out of whack,” he said.
Michael Spindler replaced John Sculley as Apple’s chief executive in a dramatic management change last month, and he has promised to cut costs radically and sharpen the company’s product focus. The cost cutting began with the layoff announcement last month, and Spindler is expected to announce a detailed reorganization next week.
On Thursday, the company announced a consolidation of its numerous divisions, including the establishment of a separate software group called Applesoft, formerly the Macintosh software division. The company soon is expected to begin licensing the highly regarded Macintosh software to other computer manufacturers.
Although Thursday’s results were bad in terms of revenue and earnings, Spindler’s accompanying statement looked ahead to some improvement. “Our most recent price reductions are accelerating our unit shipments,” he said, without providing any numbers.
Cupertino, Calif.-based Apple recently trimmed prices throughout its line by as much as 28%, bringing Apple prices closer to those for PCs base on Intel microprocessors. Intel-based PCs account for about 90% of the $70-billion personal computer market.
