Apple To Cut 148 More Jobs; 7 New Lawsuits To Fight

May 5th, 2004 at 3:00 PM - Reports by Brad Gibson

Apple Computer will lay off an additional 148 employees before the end of its fiscal year in September, the company disclosed in its second-quarter report filed with the U.S. Securities and Exchange Commission late Thursday. The company also reported seven new lawsuits filed against it, including two additional claims related to alleged faulty iPod batteries.

Apple said the layoffs will take place in Appleis American and European sales and marketing operations only and will cost Apple US$7.7 million.

The layoffs will bring the total number of employees sacked at Apple for the fiscal year 2004 to 348, including 200 people let go last month at a Sacramento, Calif. manufacturing facility. That lay off cost the company $1.9 million in severance costs, the 10-Q filing stated.

Apple said its company management approved the restructuring costs to the tune of $9.6 million last quarter, "primarily related to finalizing the closing of its Sacramento manufacturing operations," the report said.

"Once fully implemented, the Company estimates these restructuring actions will result in reduced ongoing quarterly operating expenses of approximately $6 million," the report stated.

In comparison, Apple laid off 260 positions worldwide in fiscal 2003. The company recorded total restructuring charges of approximately $26.8 million during the year, including approximately $7.4 million in severance costs, a $5 million charge to write-off deferred compensation, $7.1 million in asset impairments and a $7.3 million charge for lease cancellations.

Other interesting developments in the quarterly report, not mentioned in a recent analyst conference call by Apple executives, include:

• An additional two class action suits were filed during the second quarter against Apple related to alleged misrepresentations by Apple regarding iPod battery life. The suits are Wagya versus Apple, filed February 19 in Alameda County, Calif. Superior Court, and Yamin versus Apple, filed February 24 in Los Angeles County, Calif. Superior Court. That brings to seven the total number of iPod battery suits. The cases have been consolidated in San Mateo County, Calif., and are awaiting the naming of a coordination judge. Apple has answered two of the complaints, denying all allegations and asserting numerous affirmative defenses.
• A class action lawsuit was filed in January in Los Angeles County Superior Court alleging improper collection of sales tax by Apple in transactions involving mail-in rebates. The suit - Cagney versus Apple Computer - alleges violations of Californiais unfair competition laws and seeks unspecified damages. Apple denies the charges and is beginning its investigation of these allegations.
• Two Apple customers sued the company in January and February alleging problems with their iBook logic boards. The complaints include causes of action for violation of Californiais unfair competition law, the Consumer Legal Remedies Act and claims for breach of warranty, negligent misrepresentation, negligence and unjust enrichment. The complaints seek unspecified damages.
• East Texas Technology Partners LP filed a patent infringement suit against Apple on January 23 alleging infringement by Apple and seven other companies related to its patent of "Virtual Connection of a Remote Unit to a Server." Plaintiff seeks unspecified damages. Apple said it is investigating the claim.
• Gobeli Research Ltd. filed a patent infringement suit against Apple and Sun Microsystems on April 15 for infringement of its patent related to a "System and Method of Controlling Interrupt Processing." Gobeli alleges Appleis OS 9 and OS X operating systems infringe on their patent and the company is seeking unspecified damages.
• A patent infringement suit was filed by Shipman Corp. on April 15 related to a "Keyboard Having Illuminated Keys." The company alleges Appleis PowerBooks introduced in 2003 infringe on their patent and they seek unspecified damages, a preliminary injunction stopping the use of the technology, and other relief.
• Apple customers are buying more product warranties this fiscal year than compared to the same period of 2003. For the second quarter, Apple took in $27 million in product warranty business compared to $15 million a year ago. In terms of product warranty claims, the company paid out $27 million for the three month period, mostly in older warranty business. For the fiscal year to date, Apple had $61 million in new warranty business, but only $48 million in claims from old and new warranty business of $67 million for a profit of $13 million.