Apple posts US$740 million Q2 loss

Apple has posted a larger than expected loss for its second quarter and is looking ahead to an additional 1500 job cuts within the next year.

For the quarter that ended March 29, the company posted a net loss of US$740 million. That's US$40 million higher than company officials predicted only three weeks ago and is also a sharp decline compared to the same period a year ago, when Apple posted a profit of US$73 million.

During the second quarter of its fiscal year, the company had net sales of US$2.2 billion, an 18% drop compared to the same period last year, officials say.

Officials blame the loss on inventory write-downs of US$388 million after taxes and restructuring charges of US$130 million after taxes, in part related to first-quarter layoffs of 1300 employees.

The severe second-quarter losses add to the gloom surrounding Apple's financial performance. In the first quarter of its fiscal year, Apple posted a US$69 million loss on revenues of US$3.1 billion.

Apple CEO and Chairman Gilbert Amelio, who took over the reins at the troubled company two months ago, says Apple will cut fixed costs, simplify its product lines and streamline its business systems to return to profitability. On the product side, the company will focus on moving to an Internet-based computing architecture.

"Despite the obvious disappointment in the company's current financial performance, I want to reaffirm my strong belief that the foundations of our business are strong," Amelio said in a written statement. "Furthermore, we have the unparalleled dedication and loyalty of our customer base. We will build upon these assets to ensure an enduring future for Apple."

One analyst is glad to see that Amelio plans to make the organisational changes over the next 12 months.

"That indicates to me ... that Amelio is looking to effect a substantive change in Apple's way of doing business," says Pieter Hartsook, editor of The Hartsook Letter, in Alameda, California. "He's not looking for a quick fix to satisfy Wall Street."

Amelio is stressing simplification of product lines, Hartsook says-- contrary to the recent press speculation that Apple plans to pull out of low-end markets. Amelio also has stressed the importance of Pippin, Apple's Internet terminal/game machine, and Newton, Apple's personal digital assistant, to the company's future.

Another analyst, however, finds cause for concern in Amelio's comments about Newton and Pippin -- especially given the repeated delays in Copland, the next generation of the Mac OS. Copland is key to Apple's plans to demonstrate technical excellence and to license its operating system.

"I think they've been badly sidetracked over the past few years wtih things like Pippin and Newton," says Kimball Brown, vice-president of PC systems at Dataquest, a Gartner Group company in San Jose, California. "I want to see Copland at the top of the list and everything else ... secondary."

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