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Apple's results worse than expected, even with warning

Apple Computer announced quarterly earnings that were even worse than expected given the recent warnings, sending its stock below $20 while the company moved into damage control mode. Apple posted profits of $170 million for the quarter ending September 30, on revenues of $1.87 billion. This compares favorably with the results from the same quarter a year ago, when the company posted a $111 million profit. But Apple's margins are down and the company would have posted earnings of only $108 million if it weren't from a one-time gain of $62 million, thanks to sales of ARM stock. The company says that it shipped over 1 million PCs during the quarter, including 570,000 iMac machines. But recent releases, such as the much-vaunted G4 Cube and its flat panel monitors, have sold far below expectations, leading to price cuts and promises of cheaper versions of these products in the future.

"We have identified several factors which we believe contributed to our sales shortfall last quarter, and we are taking strong steps to remedy them going forward," says Apple CEO Steve Jobs. "Our sell-through for September was way below plan, leaving us with an overhang of channel inventory. Rather than reducing it gradually over the next several quarters, we have decided to reduce it to a normal level by the end of this quarter. This will result in a second disappointing financial quarter, even though our sell-through sales should be moderately strong. Our plan is to be back on track for the January quarter, and we remain very excited about our products and programs for 2001."

To turn around the financial results, Jobs promises to cut the "MHz gap" between the Macintosh, which is mired at 500 MHz, and the PC, which exceeded 1 GHz months ago. Within six months, Jobs says, the company will release faster G4-based systems that will compete more closely with Intel boxes. His comments are bolstered by rumors that Motorola will introduce a 700 MHz G4 in early 2001. And the company will offer a lower-priced G4 cube, along with an Internet appliance, in the same timeframe, though Jobs declined to be specific about his plans.

Apple's financials are interesting because the company is the one remaining commercial alternative to Windows on the desktop. After seeing slight gains with its iMac two years ago, Apple's marketshare has settled back down into the 3% range, however, making the platform less viable for the long term. The company hopes that the release of its next-generation Mac OS X software, due in early 2001, will rejuvenate its marketshare, and Apple says it sold 60,000 copies of the Mac OS X beta this quarter. This is positive, of course, but the company's falling share of the education market--long an Apple stranglehold--hints that this quarter's results are not the "speed bump" Steve Jobs describes it as

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