NEW YORK (CNNfn) - Apple warned Tuesday of a huge shortfall in revenue for the quarter ending Dec. 30, which will cause the company to report its first quarterly loss in three years.|
Apple announced after the close of trading Tuesday that it has experienced significantly slower-than-expected sales during October and November. The company expects to report revenue of about $1 billion and a net loss, excluding investment gains, of between $225 and $250 million when actual results are announced on January 17, 2001.
Analysts had expected Apple (AAPL: Research, Estimates) to report a profit of about $10 million, or 3 cents per share, in the fiscal first quarter ending Dec. 30. That would be down from 50 cents per share in the same period a year ago. At the same time, analysts were expecting Apple to post revenue of $1.6 billion, 60 percent more than what Apple now expects.
Apple's stock closed Tuesday at $17, up 31 cents, failing to participate in a broad-based rally that sent the Nasdaq composite to its largest one-day percentage gain ever. Following the warning, shares plunged $2.94, or 17 percent, to $14.06 in after-hours trade, placing them 81 percent below their 52-week high.
First loss in three years
Apple said that the $600 million revenue shortfall is the result of "lower than expected channel sell-through across all geographies and unplanned sales promotions and pricing actions." The net loss will be caused by the revenue shortfall and cancellation charges Apple has had to pay for component purchases it scrubbed.
"The swift industry-wide decline in PC sales will result in Apple's first non-profitable quarter in three years," said Apple's CEO Steve Jobs. "We're not happy about it, and plan to return to sustained profitability next quarter. We are committed to reducing our channel inventories to normal levels by the end of this quarter, and remain very excited about the new products and programs Apple will be rolling out in 2001."
"In light of the lower results anticipated for the December quarter, we now expect revenue for fiscal 2001 to be in the $6 billion to $6.5 billion range," said Apple's CFO Fred Anderson.
On Oct. 18, Anderson had said that Apple's revenue target for fiscal 2001 was $7.5 to $8 billion, and its earnings per share target for the year was between $1.10 and $1.25
Apple's announcement Tuesday follows a series of previous disappointments. On Sept. 28 Apple warned that its results for the fiscal fourth quarter ending Sept. 30 would be below expectations. Its shares dropped 52 percent the next day.
When Apple reported its fourth quarter results on Oct. 18, its earnings per share, excluding a one-time gain, came in one cent short of analysts' reduced expectations. Revenue for the quarter totaled $1.87 billion, up 40 percent from $1.34 billion a year ago. At the same time, Apple lowered its guidance for the first quarter of fiscal 2001, ending in December. "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," Apple's Anderson said on Oct. 18.
Company blames own mistakes
In a conference call with analysts Tuesday evening, Apple placed much of the blame for the revenue shortfall on its own strategic errors.
Jobs said that Apple's machines face a "megahertz gap" with their competitors, and that the company plans to respond by introducing models with faster processors.
Apple also has slipped to number two in education sales behind Dell Computer (DELL: Research, Estimates). The education market used to be an unquestioned stronghold for Apple.
"The tragedy is that Dell didn't win it - we lost it," Jobs said. Apple has hired a new vice president of education sales and a vice president for education marketing.
Sales of the Power Mac G4 Cube -- which Apple calls "a supercomputer miraculously engineered into an eight-in cube, suspended in a stunning crystal-clear enclosure" – have been "far below what we had planned for initially," Jobs said.
Apple also has suffered because none of its machines comes with writable CD-Rom drives. Those drives are popular with users who like to create their own CDs of music downloaded from the Web.
"We completely missed the boat on CD-read/write drives," Jobs said. "We completely blew this one."
Finally, some Apple users are postponing purchases of new machines until the company releases its OS X operating system next year. Apple sold 10 times as many copies of the public "beta" version of the OS X operating system as it expected to.
"OS X may result in some pent up demand being released," Jobs said. "I think it will become one of the landmark operating systems of our industry when it is released next year. "
Despite the expected loss, Apple continues to have a strong balance sheet, with more than $4 billion of cash and short-term investments, equal to about $11 per share.