NEW YORK (CNNfn) - Apple Computer Inc. posted a weaker-than-expected fiscal fourth-quarter profit Wednesday and warned investors that the current quarter's results will be substantially below Wall Street's expectations.|
The results sent Apple (AAPL: Research, Estimates) shares down $3.12 to $17.12 in after-hours trading on Instinet, a 15 percent drop.
The Cuppertino, Calif.-based computer maker reported a net profit of $170 million, or 47 cents per diluted share, versus a net profit of $111 million, or 31 cents per diluted share, in the year-ago quarter.
However, excluding a one-time gain, Apple earned 30 cents a share in the latest quarter, a penny shy of Wall Street's already reduced estimates of 31 cents a share.
Revenue for the quarter totaled $1.87 billion, up 40 percent from $1.34 billion a year ago.
The bad news doesn't end in the fourth quarter: The company again warned Wednesday that its numbers for the first fiscal 2001 quarter in December would see setbacks as well, prompting Apple to lower its guidance for the quarter.
"In light of September's disappointing sales and higher-than-planned ending channel inventories, we are resetting our revenue estimates for the December quarter to about $1.6 billion and are targeting a slight profit," Fred Anderson, Apple's chief financial officer said in a statement.
"We are also resetting our revenue target for fiscal year 2001 to the $7.5 to $8 billion range and our target for EPS to the $1.10 to $1.25 range," Anderson said.
Wall Street analysts had expected Apple to earn 45 cents a share in the fiscal first quarter and a profit of $1.73 for the year.
For the year, Apple reported revenue of $7.98 billion and net earnings of $786 million, or $2.16 per diluted share, compared with fiscal 1999 revenues of $6.1 billion and net earnings of $601 million, or $1.81 per diluted share.
Lower sales, inventory backlog blamed
In late September, Apple warned investors that its fourth quarter would significantly miss targets because of lower sales, primarily in its education channel, seeing fewer iMacs and iBooks sold and a shortfall in sales of its higher-priced G4 product. That news pared Apple's market value in half as investors shed shares.
Apple acknowledged on its analyst conference call that because of lower sales, it was left more channel inventory than expected.
Management said it expected to reduce it to normal levels by the end of this quarter, instead of gradually reducing it over several quarters. The company would employ several strategies, such as customer rebates, and also appeal to first-time users with iMac hardware and applications such as its movie player iMovie.
And although its high-speed G4 Cube has won rave reviews from Apple enthusiasts, the company said it may have been priced too high and had some execution flaws, which it has since corrected.
"In our track record over the last few years, we've only had one product that we've introduced that hasn't met our expectations in its first quarter of sales, and that is our G4 cube," said CEO Steve Jobs. "If we haven't hit it right on the market with the G4 cube, well, we're just going to keep working on it until we do."
News not surprising, but still hurts
While Wall Street had braced for the disappointing fourth quarter, analysts said further warnings about the December quarter were not unexpected either, and one analyst called the news "depressing."
"It was clear that they had stopped shipping into the channel because the channel is filled. Now they're looking at finished production runs, they've gotten that out into the channel and they cannot ship until the channel is cleared," J.P. Morgan analyst Daniel Kunstler told CNNfn.com.
"So, that drives revenues down and at the same time they've got to spend to create demand over the course of the quarter because the December quarter is still quite important," Kunstler said.
Bear Stearns analyst Andrew Neff had already downgraded Apple stock to "neutral," following its September warning, and said he wasn't "expecting many good things."
"I think people were anxious about what Apple would say and they said they would lower guidance and they did," Neff told CNNfn.com. "You want to take a wait-and-see approach and see [what happens] once you get past a very difficult quarter coming up.