Apple bests reduced second-quarter projections. Following the computer giant's horrendous first-quarter shortfall -- after which Fool analyst John Del Vecchio opined that "It Can't Get Much Worse" -- the Mac maker has taken a profitable step in the right direction.

	Email this page Format for printing Reuse/Reprint
	Related Links InDepth: Computer Hardware Apple: Motley Fool Research Apple Releases Mac OS X
	Discussion Boards Apple Computer

By Rick Aristotle Munarriz (TMF Edible)
April 18, 2001

While still lacking polish, Apple Computer (Nasdaq: AAPL) might not be so rotten after all. The eclectic personal computing pioneer announced fiscal second-quarter earnings of $40 million before non-recurring charges, or $0.11 a share. That was a dime better than watered-down penny estimates. Even the most optimistic analyst had dibs pegged at just $0.07 a share. While sales fell from $1.9 billion to $1.43 billion, that too was a better showing than the $1.38 billion Wall Street had been expecting.

Like most personal computer makers, Apple had already talked down loftier expectations earlier this year. And while things remain far from perfect in the PC world, Wall Street seems to think it went overboard on the pessimism. So far this year, shares of Apple have risen a healthy 53%. That includes a solid $2.39 advance in today's trading ahead of the Cupertino company's report.

But don't let the recent stock gains camouflage the fact Apple still has work to do. While the company shipped more than 750,000 units during the quarter, gross margins have slipped year-over-year and the company still trails Dell (Nasdaq: DELL) in the education market that was once a stronghold. (More on the hardware business can be found in our InDepth page on the sector.) While the company sees sequential sales and profit improvement over the last two quarters of fiscal 2001, Apple is in transition mode right now.

A lot rides on last month's rollout of OS X, Apple's latest operating system upgrade. With improved memory management and more crash resistance, diehards are upgrading now and that's nice -- but the time for "X" to mark the spot will come later. The software won't be bundled with Apple systems until later this summer. And while Apple claims that more than 10,000 software developers are working on just over 20,000 OS X applications, just 350 titles shipped during last month's launch.

Still, with a sparkling balance sheet anchored by $4.1 billion in cash, the company can afford to take a few risks and make a few misses along the way. Today marked a solid pivot for Apple after last quarter's disastrous effort, its first quarterly loss since Steve Jobs' return. It's a good step forward, too, but a lot more will be needed to complete the turnaround.

Rick Aristotle Munarriz prefers Macintoshes to Granny Smith apples, but he does not own shares of Apple Computer. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.

Feedback about News & Commentary? Please send mail to news@fool.com.