Apple Loss Worse Than Expected; IBM Delivers

Two industry bellwethers reported their quarterly earnings this week, and the results were as different as their respective product lines: Apple Computer, maker of the Macintosh OS and hardware, reported a $247 million loss, which was worse than expected, while International Business Machines (IBM) posted a better than expected gain, with $2.7 billion in earnings. The two computer makers represent opposite ends of the sales spectrum, with Apple targeting the consumer market and most of IBM's sales coming from the corporate sector. Not coincidentally, Apple was hit hard during a holiday sales season in which consumers stayed away from expensive PC purchases, and pursued PC-compatible devices instead. But both companies say that they are on track for a strong 2001, indicating that the PC buying doldrums from Christmas 2000 were simply a speed bump.

Apple's loss was its first in three years, and the company says it shipped 659,000 Macintosh PCs in the quarter. "We took our medicine last quarter and brought our channel inventories back down to about five and a half weeks," said Apple CEO Steve Jobs. "We're starting this year with a bang, shipping our new PowerBook G4 in January, our new 733 MHz Power Mac G4 in February, and Mac OS X in March." Based on UNIX, Mac OS X is a completely new version of the company's venerable operating system, and companies such as Microsoft have pledged to support the product with new software later in the year. Apple CFO Fred Anderson told analysts in a conference call Wednesday that the company plans to return to profitability this quarter.

For IBM and other companies that weren't tied to consumer sales, Christmas 2000 didn't present any problems. The company earned $2.7 billion in the quarter, compared with $2.1 billion in the same quarter a year before, while yearly revenues grew 6 percent to $88.4 billion. Earnings were $8.1 billion in 2000. "We had a very solid fourth quarter which, in many respects, reflects momentum that was building steadily all year." Says IBM CEO Lou Gerstner. "On one level, this momentum is due to strong execution, and we have increased our market share in many of our most strategic product areas." Gerstner noted that IBM's extensive product line will help it overcome any regional or market-related economic problems.

Looking forward, both companies plan to release a number of new products to help bolster the bottom line. Apple is phasing out old products, such as its current line of iMac models, with discounts in preparation of the next generation, due in February. IBM will unleash a new portable computer, the TransNote, which features handwriting recognition and a unique digital pen and paper pad combo.

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