Apple beats Wall Street expectations New iMac powers brisk first-quarter computer sales

By May Wong The Associated Press
Friday April 19, 2002

SAN JOSE, Calif. — Thanks to brisk demand for its new iMac, Apple Computer Inc. posted a second-quarter profit that beat Wall Street estimates. 

For the three months ended March 30, the Cupertino-based PC maker earned $40 million, or 11 cents a share, on revenue of $1.5 billion, the company said Wednesday. In the year-ago period, Apple earned $43 million, or 12 cents a share, on revenue of $1.43 billion. 

Wall Street analysts surveyed by Thomson Financial/First Call had projected earnings of 10 cents a share on revenue of $1.46 billion. 

The company said it shipped 220,000 units of the new flat-screen iMac during the second quarter. And though the company raised the price of the computer by $100 in late March to offset the increased cost of memory and other components, demand has not waned, chief financial officer Fred Anderson said in an interview. 

“We’re pleased to have delivered solid results while executing a challenging product transition,” Anderson said. 

Continued robust sales will help Apple show a strong performance for the current quarter, he said. The company is targeting revenues to rise sequentially to $1.6 billion in the June quarter with earnings per share to be flat or up slightly. 

The higher costs of components and airfreighting to speed up the new iMac shipments will continue to cut into gross profit margins in the June quarter, as the company continues to fulfill a backlog while honoring the original prices of those orders. 

But production is expected to catch up to demand in the current quarter and gross margins should return to normal levels in the September quarter, Anderson told analysts during a conference call. 

The company also said it plans to open 20 additional stores by the end of the calendar year. The 27 stores that Apple opened in 2001 generated $70 million in sales in the second quarter, up from $48 million in the December quarter, Anderson said. At the same time, operating losses from the stores were cut in half from $8 million to $4 million, he said. 

The company hopes the stores will become profitable by the end of the year, Anderson said. 

The retail stores are key to Apple’s effort to pull ahead of its long-standing 5-percent market share to the Microsoft-Windows platform juggernaut in the personal computer market. 

“They had to try other methods to capture new users. Putting stores in upscale malls and high-traffic areas with fancy window displays ... is a new strategy that appears to be working quite well,” said Andrew Scott, analyst with Needham & Company Inc. 

Analysts say Apple is doing a good job in the tough economy. 

“There’s almost no other computer company that was up sequentially in the March quarter, and Apple was up 9 percent,” said Dan Niles, a Lehman Bros. analyst. “And they’re one of the few companies where demand isn’t the problem.” 

For the six months ending in March, Apple said it earned $78 million on sales of $2.87 billion. That’s up dramatically from the $152 million loss on sales of $2.44 billion of the year-ago period, when the company was struggling to recover from sluggish sales, increased competition and a glut of inventory. 

Shares of Apple finished the regular session up 37 cents to $26.11 on the Nasdaq Stock Market on Wednesday, but fell 23 cents in after-hours trading. 


On the Net: