Apple admitted last night that it too is being hammered by the industry-wide decline in PC sales - to the extent that it will make a massive $225-250 million loss for its current quarter.
Apple now expects top post revenues of $1 billion for the three months to 30 December, the first quarter of the company's 2001 fiscal year, more than a third off its original target of $1.6 billion. It's also well down on the previous quarter's $1.87 million.
For the full year, Apple is now looking at revenues of $6-6.5 billion, well off last year's $7.98 billion.
Eroded margins - thanks to rebates and price cuts - will push the company into its first loss in three years. "The net loss is the result of the revenue shortfall and cancellation charges related to decreases in forecasted component purchases for current products," said Apple's statement. In short, it's paying for cancelling contracts for parts it no longer needs.
Apple has, however, plenty of ARM shares it can offload, so it may well use them to turn the headline figure into a profit.
The company's statement blandly described the market situation as "disappointing". That barely does it justice. Gateway recently said it expects its revenues to plummet and one-off charge to push its anticipated profit into a loss. Dell hasn't been feeling too well of late, and neither have many other PC vendors.
Gateway's CEO, Jeffrey Weitzen, said last week he expects the post-Christmas quarter to be one of aggressive price competition as PC vendors battle for what little business is out there. Apple, with its traditionally more-expensive-than-Wintel pricing, particularly at the high end of its range, is likely to be hit very hard in that period.
"It has become increasingly apparent that the market for personal computers has slowed well beyond our earlier expectations," Apple CFO Fred Anderson admitted yesterday, and added that the company doesn't expect to see a profit until the last three quarters of 2001.
And CEO Steve Jobs said the company plans "to return to sustained profitability next quarter". We wish him luck - he's going to need it.
Part of the solution will be to minimise all the kit languishing in the company's dealer channel, but that may mean further price cuts and higher advertising bills - Anderson said the rebates and price cuts made so far will have a $135 million "unplanned sales promotion costs" impact on earnings - which won't help margins one little bit.
In an uncharacteristic admission, Jobs said mistakes "of our own making" had been made. "We are still recovering from shooting ourselves in the foot with a sales force transition in July... we plan to come back very strong when the next education buying seasons begins this spring," he said.
And Apple "completely missed the boat" on CD read/write drives. "We just blew this one," Jobs commented. "It will be fixed soon," he added, with some "amazing new hardware under development that will reassert Apple's leadership in several key product categories".
The new kit should also tackle the megahertz gap between PowerPC and the x86. "Even though our Power PC processors are actually faster than Intel's fastest processors for [are] slower," Jobs said. "We are very aware of this and plan to introduce models with faster megahertz processors in the coming months - this is all on track."
That's a reference, we reckon, to Motorola's PowerPC G4 Plus, which is believed to have entered production this past summer. ®