Fool.com: Apple Beats Lowered Expectations (Breakfast News) October 14, 1999

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Thursday, October 14, 1999

"There is always an easy solution to every human problem -- neat, plausible, and wrong."
-- H.L. Mencken

Apple Beats Lowered Expectations

By Richard McCaffery (TMF Gibson)

Strong sales of Apple's (Nasdaq: AAPL) colorful iMac computers and newly introduced iBook portables powered Apple to a better fiscal fourth quarter than expected after an earnings warning three weeks ago.

The company that introduced the world to the personal computer two decades ago reported earnings (minus nonrecurring items) of $0.51 per diluted share on net income of $90 million, and sales of $1.3 billion. Analysts polled by First Call/Thomson expected earnings of $0.45.

Including nonrecurring items the company posted earnings of $0.63 per diluted share on profits of $111 million. But even with the extra juice from an after-tax gain, Apple's fiscal fourth quarter earnings fell short of last year's mark of $0.68 per diluted share. The company said the outlook for a strong fiscal first quarter, however, is very good.

Apple, a stock that has more than doubled this year, first warned of the earnings shortfall September 20 when it reported that Motorola (NYSE: MOT), the manufacturer of the G4 processor chip that fuels the Power Mac G4 computer, couldn't deliver enough chips to supply demand. Motorola countered that it had kept Apple informed of supply chip status all along.

Why rehash all this? Apple has reconfigured processor speeds in the Power Mac to match demand with chip supply, and announced that IBM (NYSE: IBM) will be manufacturing G4 processor chips in the first half of next year. Problem solved. With a backlog of over $700 million, things look swell for Apple.

And check out the company's full-year performance: Apple reported sales of $6.1 billion and income of $601 million, or $3.61 per diluted share, dusting last year's results and analyst estimates of $2.52 for this year. This represents annual growth of about 72% -- for a stock with a price-to-earnings ratio of 17.7.

News to Go

Priceline.com (Nasdaq: PCLN) is suing Microsoft (Nasdaq: MSFT) and subsidiary Expedia.com for patent infringement in U.S. District Court. Officials from the name-your-own-price company claim Expedia's name-your-own-price for hotel rooms service violates its intellectual property.

Laser vision correction technology company VISX (Nasdaq: VISX) reported Q3 net income of $24.7 million, or $0.36 per share, compared to $14.7 million and $0.22 per share a year ago. Earnings topped analyst estimates by $0.02 per share.

Medical supply, electronic security, and diversified industrial company Tyco International (NYSE: TYC) denied a report that its earnings are inflated and said it expects to exceed fiscal fourth quarter earnings estimates, which will be reported next week.

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