Apple warns of loss as sales disappoint

The warning from Apple followed one last week from number four US personal computer maker Gateway Inc, which said its fourth quarter sales and profits would fall far short of Wall Street estimates due to slack holiday sales. Gateway said at the time that sluggish consumer sales could spark a price war in the New Year.

Jobs promised a revitalized Apple next year with the release of a new version of its Macintosh operating system, fresh products and a clean supply chain. And he said Apple was sitting on more than $4 billion in cash and short term securities. "We’re confident we will return to sustained profitability next quarter," Jobs said.

Analysts were less sure Apple could stage one of its famous turnarounds so quickly. "I am not convinced they can achieve break-even in the second quarter," said Merrill Lynch analyst Steven Fortuna, although he praised Apple’s decision to clear inventory backlog this quarter.

The stock of the Cupertino, Calif-based company fell to $15-1/64 on the Instinet electronic exchange, down from a regular session close of $17. Apple shares were above $64 in September, before the company first warned of slowing year-end demand.

REVENUES DOWN: Apple now sees revenue of about $ 1 billion and a net loss,excluding investment gains, of between $225 million and $250 million, when it reports its first fiscal quarter results January 17.

Analysts had expected the company to post revenues of about $1.6 billion and a profit of 3 cents a share, according to First Call/Thomson Financial. In last year’s first quarter, Apple reported a first quarter profit of 50 cents a share, adjusted for a later stock split.

Apple said its own discounts and slow sales led it to expect fiscal 2001 revenues of $6 billion to $6.5 billion. The company had already cut its revenue target in October for the fiscal year 2001 to the $7.5 billion to $8 billion range.

When it reported its fourth quarter earnings in October, Apple reduced revenue estimates for the first quarter ending in December to about $1.6 billion, and was targeting a "slight profit." "It’s qualitatively not a surprise, because Apple has themost exposure to consumer retail. But the expected revenue base was already taken down sharply, so… the size of the adjustment is a surprise," said SG Cowen analyst Richard Chu.

JP Morgan’s Daniel Kunstler said Apple appeared to betaking the right steps to make its products more attractive to core users.

Merrill’s Fortuna said he had been pessimistic about Apple’s sales. Its products had lost luster and it needed to reinvent itself, which would take time, he said. "I am not convinced they can achieve break-even in the second quarter," he said, althogh he concluded Apple was doing what it needed to do this quarter, by selling unsold products to empty the supply chain.

"Apple’s real opportunity here is to become a major player in what will likely be a high-growth market for devices and appliances to access the web," he said. "That’s the Apple bull case for next year."