Thursday, April 15, 1999

"Stock option plans reward the executive for doing the wrong thing. Instead of asking, 'Are we making the right decisions?' he asks, 'How did we close today?' It is encouragement to loot the corporation." -- Peter Drucker

Latest Market Numbers

Apple Tops Estimates

Apple Computer (Nasdaq: AAPL) posted higher-than-expected fiscal second-quarter earnings of $93 million, or $0.60 per share -- before one-time charges -- on strong sales of its iMac and Power Macintosh G3 computers. That's up 69% from last year's profit of $55 million and up 58% from last year's earnings per share of $0.38. Analysts had projected EPS of $0.57.

Including a $50 million after-tax gain on the sale of ARM Holdings shares and an $8 million restructuring charge, Apple earned $135 million, or $0.84 a share. Revenues gained 9% to $1.53 billion, with international sales accounting for half of that, and gross margins came in at 26.3%, versus 24.8% a year ago.

The quarter was Apple's sixth straight profitable quarter, and the company's overall year-over-year unit shipment growth outpaced that of the computer industry -- 27% compared with research firm IDC's industry forecast of 14%. Apple CFO Fred Anderson forecast higher Q3 revenues and unit shipments, from both the quarter just passed and the same year-earlier quarter, but predicted that Q3 gross margins will be flat to slightly down from this quarter.

Although sales of Apple's iMac and G3s remained strong, sales of its PowerBook notebook computers were weaker as customers put off buying in anticipation of a yet-to-be-confirmed upgrade. And the verdict is in: Of the five fruity iMac colors, blueberry has proven to be the most popular. As a result, Apple is now shipping eight-packs consisting of four blueberry models and one each of the other four colors.

News to Go

Coca-Cola (NYSE: KO) has signed long-term deals with Burger King, a unit of Diageo PLC (NYSE: DEO), and Domino's Pizza to be their primary soft-drink supplier. The Burger King deal is a setback for Coke rival PepsiCo (NYSE: PEP), which also had been aggressively pursuing a deal with the fast-food restaurant chain. But the costly Burger King deal involving hundreds of millions of dollars in rebates and other enticements could, in fact, end up hurting Coke's profit margins.

The Department of Defense essentially nixed General Dynamics' (NYSE: GD) proposed bid to acquire Newport News Shipbuilding (NYSE: NNS). Newport News said it will proceed with its proposed merger with Avondale Industries (Nasdaq: AVDL).

Imperial Chemical Industries (NYSE: ICI) has agreed to sell four businesses to private chemical firm Huntsman Corp. in a deal valued at $2.8 billion as part of ICI's continued efforts to dispose of certain chemical interests and pay off a mountain of debt. The company's post-restructuring debt totals about $6.45 billion.

Security and anti-virus software maker Symantec Corp. (Nasdaq: SYMC) named seasoned IBM executive John Thompson as its new chairman, president, and CEO. Thompson has been general manager of IBM Americas, a $37 billion business unit.

Speaking to the U.S. Chamber of Commerce, Federal Reserve Governor Laurence Meyer said it may soon be time to think about raising interest rates, The Wall Street Journal reported. He argued that, adjusted for inflation, short-term interest rates are now lower than they were before the Fed cut rates last fall -- even though the unemployment rate is lower and projections for economic growth higher. Still, there are no indications that the Fed is ready to raise rates at its next meeting on May 18.

Earnings to Go:

Advanced Micro Devices (NYSE: AMD) -- fiscal Q1 EPS: loss of $0.81 (before charges) vs. loss of $0.44 last year; estimate: loss of $0.92
Allaire Corp. (Nasdaq: ALLR) -- Q1 EPS: loss of $0.19 vs. loss of $0.89 last year; estimate: loss of $0.27
Ameritrade (Nasdaq: AMTD) -- fiscal Q2 EPS: $0.14 vs. breakeven last year; estimate: $0.07
Aspect Telecommunications (Nasdaq: ASPT) -- Q1 EPS: loss of $0.19 (before charges) vs. profit of $0.28 last year; estimate: loss of $0.10
Electronics For Imaging (Nasdaq: EFII) -- Q1 EPS: $0.31 vs. $0.08 last year; estimate: $0.25
Ford Motor Co. (NYSE: F) -- Q1 EPS: $1.46 vs. $1.22 last year; estimate: $1.39
General Motors (NYSE: GM) -- Q1 EPS: $3.04 vs. $2.27 last year; estimate: $2.89
Polaroid (NYSE: PRD) -- Q1 EPS: loss of $0.34 (before one-time items) vs. loss of $0.39 last year; estimate: loss of $0.35
Tellabs (NYSE: TLAB) -- Q1 EPS: $0.52 vs. $0.37 last year; estimate: $0.49
TranSwitch Corp. (Nasdaq: TXCC) -- Q1 EPS: $0.18 vs. $0.04 last year; estimate: $0.16
VISX Inc. (Nasdaq: VISX) -- Q1 EPS: $0.58 vs. $0.29 last year; estimate: $0.54

Stock Splits:

Qualcomm (Nasdaq: QCOM) said it will split its shares 2 for 1 on May 10... VISX Inc. (Nasdaq: VISX) announced a 2-for-1 stock split, effective May 12... TranSwitch Corp. (Nasdaq: TXCC) intends to split its stock 3 for 2 shortly after its May 27 annual meeting.

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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor