||Apple has announced their financial results from the 1st quarter of 1999 which runs from October 1st to December 31st of 1998. The company profited US$152 Million, more than 3 times that of last year's Q1 profit of US$47 Million. Estimates from analysts had been pegged at about half of that level meaning that Apple had pleasantly surprised the industry. Apple's results were released at 4:00 PM CST which was well after the markets had closed.
The company also reported gross margins of 25% which is among the highest in the industry.
Apple also reported that their on-hand inventory was only US$25 Million, a startling low figure that translates into 2 days of inventory on-hand. Most manufacturers have at least 2 weeks of inventory on hand while many have even higher levels. Apple leads the computer industry in this area while Dell, the former number 1 comes in 2nd with about 8 days of inventory on hand. When questioned on whether or not 2 days of inventory on-hand was a healthy level, Apple's CFO said that their relations with their vendors was excellent and that this was a good number for them. Channel inventory (the amount of units in the retail channel) in the meanwhile was at a 5 week level.
Apple's numbers in full:
CUPERTINO, Calif., Jan. 13 (Reuters) -
APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share amounts)
Dec 26, 1998 Dec 26, 1997
Net sales $1,710 $1,578
Cost of sales 1,228 1,225
Gross margin 482 353
Research and development 76 79
Selling, general, and
administrative 279 234
Total operating expenses 355 313
Operating income 127 40
Gain from sale of investment 32 --
Interest and other income
(expense), net 10 7
Total interest and other
income (expense), net 42 7
Income before provision
for income taxes 169 47
Provision for income taxes 17 --
Net income 152 47
Earnings per common share:
Basic 1.12 0.37
Diluted 0.95 0.33
Shares used in computing
earnings per share (in thousands):
Basic 135,270 127,989
Diluted 172,062 139,839
NOTE : Current quarter results include a $29 million
after-tax gain from the sale of 2.9 million shares of ARM
Holdings plc. Without this non-recurring item, net income for
the quarter would have been $123 million, or $0.78 per diluted
The Mac Observer: Despite yesterday's predictions, Apple's Stock is currently down some 11.02% (-5 1/8) to close at 41 3/8. Apple's CFO Fred Anderson was very upbeat and positive about yesterday's results. He joked about his favorite color when asked by a reporter to name what it was (Blueberry, but Grape is a strong 2nd place for Mr. Anderson).
Mr., Anderson also said that Apple was expecting sales for the 2nd quarter to be lower than the Q1 but higher than Q2 of 1998.
In a very interesting position, Mr. Anderson said he did not expect prices in the computer industry to continue falling at the rate they did in 1998. This is contrary to general industry consensus which sees the continued introduction of PCs in the US$400 to US$800 range and that those computers would continue to gain marketshare. At the same time, Mr. Anderson said that Apple does intend to keep the iMac competitively priced throughout the year.
On a note about gross margins which were at 25% for the quarter due to strong sales of OS 8.5, Mr. Anderson was very vague about whether Apple would use those margins to lower prices even further than they are now. With Apple still very near to production capacity in many areas, this is not very likely.
Congratulations to Mr. Anderson, Steve Jobs, and the entire Apple Team for a fantastic quarter!