Apple Warns of Earnings Slowdown

SAN JOSE, Calif. (AP) â€” These are dark days for the companies that make personal computers. <br><br>Adding to the industry's woes, Apple Computer Inc. warned Tuesday that it is losing money this

Wednesday, December 6th 2000, 12:00 am

By: News On 6

SAN JOSE, Calif. (AP) â€” These are dark days for the companies that make personal computers.

Adding to the industry's woes, Apple Computer Inc. warned Tuesday that it is losing money this quarter and will fall well short of Wall Street's expectations because of a drastic slowdown in sales.

Not counting one-time gains from investments, Apple expects a loss of between $225 million and $250 million when results are released next month.

Apple shares fell $2.25, or 13 percent, to $14.75 in morning trading on the Nasdaq Stock Market.

Analysts surveyed by First Call/Thomson Financial already had diminished expectations, forecasting earnings of 3 cents per share for the three months ending Dec. 31. In the same period last year, Apple earned 50 cents per share.

Revenue this quarter will be about $1 billion â€” $600 million lower than expected, Apple said. Revenue for all of fiscal 2001 is expected to be between $6 billion and $6.5 billion, down from earlier projections of $7.5 billion to $8 billion.

``The swift industrywide decline in PC sales will result in Apple's first non-profitable quarter in three years,'' Apple chief executive Steve Jobs said. ``We're not happy about it, and plan to return to sustained profitability next quarter.''

The news follows a bad fourth quarter for Apple, in which the Cupertino-based company that revolutionized personal computing missed Wall Street predictions even after warning analysts to lower their expectations.

It also comes at a bad time in the industry. Last week, Gateway Inc. and Hewlett-Packard Co. warned of sluggish domestic demand for PCs, a trend that has been blamed on a slowdown in the economy and a saturated market.

Jobs said in a conference call that Apple was hurt by those same problems and internal issues at Apple, including the ``megahertz gap'' between its new Mac Cube computers and other PCs. Apple's machines have 500-megahertz chips, while other PCs contain 1-gigahertz chips.

While Apple has long said its Cubes are just as fast â€” if not faster â€” because of their superior design, the company also has acknowledged that the perception that the Cubes are half as fast is hurting sales. Jobs reiterated that Apple is producing computers with higher-megahertz processors.

Also, Apple has slipped to No. 2 behind Dell Computer Corp. in sales to schools.

``The tragedy is that Dell didn't win it, we lost it,'' Jobs said. ``We are still recovering from a sales force transition in July.''

Jobs sought to reassure investors that Apple can weather this bad quarter and even an extended downturn. ``We have an Arnold Schwarzenegger balance sheet, with over $4 billion in cash,'' he said.

Analysts said Apple is especially vulnerable to poor PC sales because that is its core business, while competitors like Dell, Compaq and HP are also in the storage and server business.

``Apple has been definitely running out of steam,'' said Robyn Bergeron, an industry analyst with the Cahners In-Stat Group. ``You can only run on a cute machine on your desktop for so long before you have to offer your customers a lot more.''

Despite the short-term problems plaguing the PC market, the industry should see a rejuvenating transformation in the next few years, said analyst Tim Bajarin, president of Creative Strategies Inc.

He said that as Internet access from handheld and other wireless devices improves, the PC will be even more important as a central server for those devices, and as a digital media player and a video editor. Apple needs to develop such devices that can work with its PCs, Bajarin said.

``None of us believe the PC is going to die off,'' he said. ``We just think in the next two, three years it's going to shift its emphasis from being a pure Internet access tool to being at the heart of the devices and information you have in your home.''

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On the Net:

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