Apple Posts $111 Million Profit; Lowers G4 Speeds

Apple Computer has announced a net profit of $111 million on $1.34 billion in revenue for its fourth fiscal quarter, with earnings of $601 million on $6.1 billion in revenue for the entire 1999 fiscal year. Apple’s Q4 results were down 14 percent from the same quarter a year ago, but Apple’s 1999 revenue and earnings were up from 1998, which had earnings of $309 million on $5.9 billion in revenue. Apple’s gross margin for its fourth quarter was a healthy 28.7 percent, but the Q4 earnings reflect one-time gains from restructuring and seemingly perpetual sales of shares in ARM Holdings plc.; without these, Apple’s net profit would have been $90 million. International sales accounted for only 35 percent of Apple’s revenues this quarter, a significantly lower portion than in previous quarters, presumably due to limited availability of new Apple products like G4 systems outside the United States. Although Apple technically beat analysts’ expectations for the fourth quarter – after issuing a warning of lowered earnings a few weeks earlier to reduce those expectations – Apple attributes the revenue slump to costs associated with product transitions (such as the iBook, held up by display shortages and the recent Taiwan earthquake) and limited availability of the PowerPC G4 processor from Motorola. Another factor was rampant rumors of new systems, which caused many customers to put off purchasing decisions. Apple says it expects a strong December quarter, with more than $700 million in backlogged orders.

At the same time, Apple has announced revisions to the Power Macintosh G4 line, toning down their processor speeds to match CPU chip availability from Motorola. The new Power Macintosh G4 lineup will feature processor speeds from 350 to 450 MHz with prices ranging from $1,600 to $3,500 for standard configurations – basically, 50 MHz slower than the the models Apple initially announced. The 400 and 450 MHz models will feature the Sawtooth motherboard with AGP graphics, and Apple has promised that G4-based servers will be available by November. Unfortunately, 500 MHz G4 systems aren’t expected to be available until early 2000. Apple also announced that IBM will begin manufacturing G4 CPUs during the first half of 2000 for use in Apple products, which should eventually reduce Apple’s reliance on Motorola as its sole source of G4 CPUs.