iMac sales help Apple post strong Q1

Apple Computer Inc. today cited strong sales of iMac computers in reporting first-quarter earnings of US$152 million, or 95 cents per share, on revenue of $1.7 billion.

Analysts polled by First Call Corp. expected Apple to report earnings per share of 70 cents for the quarter, which ended Dec. 26, 1998.

For the first quarter a year ago, Apple reported earnings of $47 million, or 33 cents per share, on revenue of $1.57 billion, 8 per cent less than revenues for the same quarter this year. Meanwhile, gross margins were 28.2 per cent, up from 22.4 per cent in the prior year, the company said in a statement and teleconference call.

The first quarter of fiscal year 1999 included a $29 million after-tax gain from the sale of 2.9 million shares of ARM Holdings plc. Without this non-recurring item, the company's net income would have been $123 million, or 78 cents per share.

Noting that the first quarter is typically the company's best because of education and holiday sales, independent analyst Pieter Hartsook said the results were still better than he expected.

"In addition to running Pixar (Animation Studios), Steve Jobs (interim Apple chief executive officer) has shown he can run a $6 billion business in his spare time," said Hartsook. "Apple has succeeded at controlling costs, moving engineering into production and managing the channel."

Apple sold 519,000 iMac computers during the quarter, representing 55 per cent of unit sales during the quarter and driving overall unit growth to 49 per cent year-over-year. Ending inventory dropped to $25 million, which represents two days of inventory, and unit growth year-over-year was three to four times higher than the industry average, Apple said.

Meanwhile, beefed up advertising pushed operating expenses to $355 million, executives said.

International sales accounted for 47 per cent of the quarter's revenues, with Europe accounting for 27 per cent of the unit sales, Japan with 13 per cent, the rest of Asia with 5 per cent and the Americas with 55 per cent, said Fred Anderson, Apple's chief financial officer, in the conference call.

"Growing earnings combined with world-class asset management resulted in positive cash flow from operations of $223 million," Anderson said in the statement.

Looking forward, key growth drivers for the company will be the new iMacs and new G3 PowerMacs, he said.

Meanwhile, Apple's workforce dropped in the quarter from 9,662 to 8,788, according to Anderson.

Apple stock rose just over 37 cents to close at $46.50 on the Nasdaq stock exchange.

Apple, in Cupertino, California, is on the Web at http://www.apple.com/. Apple Australia is at http://www.apple.com.au.

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