Apple Computer stuns Wall Street with $700m loss

Bad news at Apple Computer worsened yesterday with a warning from the company that it expected to suffer a giant loss of $700m (pounds 450m) in the current quarter, far exceeding the direst predictions of analysts on Wall Street.

The announcement can only cast further doubt over the long-term viability of the once-mighty company as an independent force in the personal computer industry that it helped to pioneer. It came one day after Moody's Investors Service in New York downgraded its debt to junk-bond status.

The dismal performance guarantees that this quarter, which ends on 29 March, will be the worst in Apple's history. The losses far outstrip the $188m of red ink that was revealed in one quarter in the middle of 1993.

The company emphasised yesterday, however, that the losses would be attributable in a large part to a write-down in the value of unsold inventory and to costs associated with restructuring. The company began a process of laying off 1,300 of its 14,500 employees at the start of this year.

Apple conceded, however, that both its shipping volumes and its revenues for the quarter would be significantly down on the same quarter last year, when the company earned $73m on sales of $2.65bn. The slowdown has burdened Apple with a huge backlog of unsold computers and accessories that it has been unable to sell.

Although Apple had been signalling to Wall Street that a large loss was likely this quarter, few analysts had been expecting anything so dramatic. "It's a shocker in one sense because I don't think anyone realised how big the inventory write-off would be," remarked Tim Bajarin, president of Creative Strategies Research International in San Jose, California.

Gilbert Amelio, who took over as Apple's chairman two months ago, tried to put an optimistic veneer on the news, insisting that he remained convinced that the company's fortunes could be turned around. He promised to unveil a detailed rescue plan in May.

"I'm confident at this point that I know what the problems are and that they are fixable," Mr Amelio said from Apple's headquarters in Cupertino, California. "We plan to aggressively address these issues and take the necessary corrective actions. We will be able to articulate our plans by early May."

Much of the personal computer industry in the US has been issuing warnings of tumbling earnings as demand for home computers has begun to slide. Some manufucturers, notably Compaq, have introduced across-the-board price cuts, which can only compound the squeeze on Apple. Apple has been doubly hurt, meanwhile, because of falling consumer confidence in the company and its future. Fears about its viability were fed by rumours at the start of this year that it was contemplating a merger with Sun Microsystems as its only escape route from disaster.

Shortly after taking the reins at Apple, Mr Amelio put an end to tentative takeover talks with Sun Microsystems and indicated his own preference for maintaining Apple's independence. Apple began to hit the headlines with its difficulties early this year, when it revealed a $69m loss for the last three months of 1995. Once the whizz-kid of the industry, Apple has found itself increasingly sidelined by the dominant standards of the Microsoft Windows operating system and the chip technology of Intel. The ensuing turmoil led to the replacement of its then chief executive, Michael Spindler, with Mr Amelio.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
Sport
footballBrighton vs Arsenal match report
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project
Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

Diana Krall interview

The jazz singer on being friends with Elton John, outer space and skiing in Dubai
Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

Pinstriped for action

A glimpse of what the very rich man will be wearing this winter
Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

Russell T Davies & Ben Cook: How we met

'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Bill Granger recipes: Our chef serves up his favourite Japanese dishes

Bill Granger's Japanese recipes

Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
Michael Calvin: How we need more Eric Cantonas to knock some sense into us

Michael Calvin's Last Word

How we need more Eric Cantonas to knock some sense into us