Advertisment

So Apple Isn't Applesauce

author-image
DQI Bureau
New Update

Leaving Fort Wayne, Indianapolis, to attend

the semiannual Macworld trade show in San Francisco, Brad Bradley had all but given up on

Apple Computer Inc. A faithful Macintosh user for years, the executive with Fort Wayne

Metals was ready to trade in the company's Macs for Windows machines. "I was really

starting to question Apple's future viability," says Bradley.

Advertisment

But on the first day of the show, Bradley

changed his mind as he stood listening to Steven P Jobs tell of Apple's new, improved

future-one that might actually include making money. The Apple Co-Founder and interim CEO

said the company will report a net profit of $ 45 million for the quarter ended December

31, halting a four-quarter, $ 1 billion losing streak. That, plus recent software deals

with Oracle Corp. and Microsoft Corp., persuaded Bradley to stick with his Macs a while

longer: "I feel a lot better about Apple now."

So does Wall Street. Apple's stock, which

rose in December on rumors of better numbers, jumped 20 percent, to 20, before settling at

18.94. "This doesn't mean Jobs has saved the company, but it's definitely great

news," says Analyst Timothy P Bajarin.

Indeed. While Apple sold 133,000 Macs in

November-50,000 more than it expected-overall sales were 26 percent below 1996's December

quarter, leaving its yearend market share at 3.3 percent half what it was a year ago. And

to stay in the black as it nears the always-dismal March quarter, Apple will have to keep

tightening on costs. This winter could be especially tough as PC rivals start pushing $

700 machines.

Advertisment

Low-end Action



Still, for the first time in years, Apple seems to have a foundation to build on. After
massive layoffs and other cost-cutting, it can turn a profit-even though its new revenue

stream is about 40 percent below what it was when the slide began. There are still

possible asset sales and manufacturing efficiencies, leading some analysts to believe the

company can stay in the black.

But can Apple grow again? Apple's CFO Fred

Anderson says his long-term goal will be for Apple's revenue growth to match that of the

PC industry-about 14 percent currently. For the next few quarters, though, Apple will do

well to hold market share, he concedes, "It'll be another two to three quarters

before we can begin showing growth," he says. That's because Apple doesn't yet have

an entry at the low end, where other PC makers have their hottest sales action.

Apple's growth strategy rests on a series

of new products, including network computers priced below $ 800, that would work on the

Web or corporate intranets. And executives hint the company is working on a sub-$ 1,000 PC

to restart Apple's efforts in the home PC market. Apple has been absent from this

category, which now accounts for 40 percent of the market.

In the meantime, Jobs is making progress in

chipping away at the chronic depression in Mac-dom. Customers at MacWorld were cheered by

the earnings news and by the announcement of new software coming from Oracle and

Microsoft. The question: Given Apple's still precarious condition and the competition, can

Jobs keep the crowds cheering every quarter?

PETER BURROWS



in San Mateo, California,


Copyright BusinessWeek


January 19, 1998.

Advertisment