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Apple suffers Q1 loss on weak revenues

New York, Jan. 16: Apple Computer reported Monday that it lost money in its fiscal first quarter, ended in December, on revenues that were slightly weaker than analysts’ expectations. Apple executives said business conditions would probably remain difficult in the current quarter, predicting a “slight profit” with revenues about the same level as in the December quarter. Yet despite the tough times, Apple executives vowed to not waver from their strategy of spending to develop new hardware and software products and opening stores.

“We’re going to keep investing through this downturn,” said Steven P. Jobs, Apple’s chief executive. “When the economy rebounds, we will be positioned for growth.”

There were some bright spots for Apple. Its quarterly revenues were $ 1.47 billion. That was a bit below analysts’ consensus estimate of $ 1.49 billion, according to Thomson First Call, but 7 per cent higher than the same quarter a year earlier — a gain that compares favourably with the performance of other personal computer makers, except Dell Computer, which continues to grow strongly in the downturn.

Apple shipped about the same number of its Macintosh computers — 743,000 — as in the same quarter a year earlier. But its revenues rose because the average selling price of its machines was higher. In particular, Apple’s iMac models with flat-panel screens, which are more expensive than conventional desktops, contributed to the trend.

The Apple stores, which now total 51, are generating healthy sales, at $ 148 million in the December quarter, up from $ 102 million in the previous three months. The loss on its stores declined to $ 1 million in the December quarter from $ 3 million. And notably, half the people who bought Apple computers in the stores had never owned a Mac before. That, analysts say, suggests that the company’s strategy of using the stores to entice users to switch from PC’s running Microsoft’s Windows operating system is getting some traction.

“I would call that beyond encouraging,” Jobs said in an interview. “I’d call that proof.”

Apple sold 2,16,000 of its iPod hand-held music players in the quarter, a performance the company characterised as strong. But Charles R. Wolf, an analyst at Needham & Co, said Apple could do far better if it introduced a less expensive iPod. Its current models sell for $ 299 to $ 499 each. “Apple really has to get into the sweet spot of that market,” Wolf said.

Apple lost $ 8 million, or 2 cents a share. That compares with a profit of $ 38 million, or 11 cents a share, in the quarter a year earlier. The recent quarter’s results were hurt by a $ 17-million charge against earnings for discontinued operations, including a manufacturing facility in Singapore and some sales offices. The company also took a $ 2 million charge because it adopted a new method of accounting for certain lease obligations.

Excluding those one-time charges, Apple earned $ 11 million, or 3 cents a share, matching analysts’ estimates.

Apple’s financial performance did little to counter Wall Street’s lingering scepticism. Analysts say Apple is a classy niche producer of elegantly designed machines and clever marketing. But they often criticise Jobs for seeming to take a nonchalant attitude toward quarterly profits.

“It’s short-term financial management that is lacking,” said Don Young, an analyst at UBS Warburg.

Apple does have a comparatively strong balance sheet. The company has more than $ 4.4 billion in cash. Young estimated that its cash position was the equivalent of $ 12 a share. The company’s shares closed at $ 14.43 Wednesday, down 18 cents for the day. In after-hours trading, Apple shares fell further, to $ 14.10. That suggests, Young said, that the value investors place on Apple’s business, excluding its cash nest egg, is a bit more than $ 2 a share. “That’s what Wall Street thinks of Apple,” he said.

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