Apple results bad, but 'worst is over'

After reporting a second-quarter US$708 million loss yesterday, Apple officials are saying that the worst of the firm's woes are over. But maybe not, say several analysts.

After reporting a second-quarter US$708 million loss yesterday, Apple officials are saying that the worst of the firm's woes are over. But several analysts are sceptical about the company's prospects for returning to profitability.

The company's loss for the quarter that ended on March 28 compares to a loss of US$740 million for the same period a year ago.

"Financial results were a disappointment, but we have taken some major decisive, corrective action," Gil Amelio, Apple chairman and CEO, says. "We feel that the worst is behind us and we're back on track."

Apple reported a charge of US$375 million for the write-off of in-process research and development as a result of its acquisition of Next Software, and a charge of US$155 million to cover costs of Apple's restructuring which was announced March 14.

Apple's loss last quarter was US$120 million.

Apple officials say the second quarter has always been slow for sales, but that the company is on a drive to reduce operational costs by US$500 million by the end of the financial year. Operational costs for the second quarter were US$2.3 billion. Excluding charges for the Next acquisition, operational losses were around US$186 million.

Analysts arn't fazed by Apple's fiscal bloodletting.

"I am surprised the losses were not higher," says Stephen Auditore, president of Zona Research in Redwood City, California. "Apple is not relevant to the debate any longer. They had good technology, but it hasn't really changed in eight years."

"If you're going to take a loss, it might as well be a large one," says Chris Le Tocq, analyst with Dataquest, in San Jose, California. "Apple finally has some exciting hardware and now the question is whether or not they can breathe some excitement for their products into the market."

About half of Apple's operational cost savings will be made by reducing the company's full-time staff. Apple has laid off about 1200 of 2700 full-time employees and another 150 contract and other workers, according to Fred Anderson, the company's chief financial officer.

The good news, according to Anderson, is that the company has US$1.4 billion in the bank and that net cash for the quarter amounted to US$374 million.

Meanwhile, revenues for the latest quarter were US$1.6 billion, compared to US$2.1 billion for the prior quarter and US$2.2 billion for the second quarter of 1996.

"The last 12 months have been stormy, but the steps to recovery have been taken and we will return to profitability," says Amelio.

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