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So Apple Isn't Applesauce


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SO APPLE ISN'T APPLESAUCE

It's back in the black--and has some growth prospects

Leaving Fort Wayne, Ind., 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.

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 Dec. 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%, 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% below 1996's December quarter, leaving its yearend market share at 3.3%, 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.

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% 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% 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% 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?By Peter Burrows in San Mateo, Calif.Return to top

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