<BREAKFAST WITH THE FOOL>

Thursday, July 15, 1999

"The closest to perfection a person comes is when he fills out a job application form." -- Stanley Randall

Latest Market Numbers

Yummy Apple Earnings

"Yummy" and colorful computer maker Apple Computer (Nasdaq: AAPL) increased its profits by 52% in the fiscal third quarter ended June 26 to $114 million (before a one-time gain) from $75 million (also before one-time items) a year ago. On a per-share basis, Apple turned in earnings of $0.69 versus $0.50 in the year-earlier quarter and a nickel ahead of analysts' mean estimate of $0.64.

Including gains from sales of shares of ARM Holdings PLC and other unusual items in the third quarter and the year-ago quarter, earnings doubled to $203 million from $101 million. Revenues were up 11% to $1.56 billion, while gross margins moved up to 27.4% from 25.7% year-over-year, thanks to lower component prices.

The quarter's results were driven by strong sales of Apple's popular iMac computer. Overall unit sales grew 40% from a year ago. CFO Fred Anderson said he expects fiscal Q4 units and sales to increase "slightly" from Q3 levels, and gross margin to remain about the same. He added that fiscal Q1 results should be "strong."

The company also announced plans to buy back up to $500 million of its common shares, calling the stock a "good long term investment." Apple didn't specify the period over which it would repurchase the stock. It's the company's first buyback plan in almost seven years.

News To Go

Ziff-Davis (NYSE: ZD), which publishes computer-related magazines such as PC Magazine, PC Week and Yahoo! Internet Life and runs the Comdex computer trade show, announced it has hired Morgan Stanley Dean Witter to explore "strategic alternatives to maximize shareholder value." These may include "strategic alliances, mergers, and the sale or joint venture of all or some of the company's businesses." Ziff-Davis is majority-owned by Softbank, the major force behind the likes of Yahoo! (Nasdaq: YHOO) and E*Trade Group (Nasdaq: EGRP). Softbank is revising its strategy to focus on companies that operate fully on the Internet.

Drug wholesaler McKesson HBOC (NYSE: MCK) said it's revising results downward for fiscal 1997, 1998, and 1999 as a result of an audit of accounting practices at its recently acquired Healthcare Information Technology Business, formerly HBO & Co. The revisions subtract $327.4 million from revenues over the last three fiscal years and eliminate $191.5 million from operating income.

Computer chip maker Advanced Micro Devices (NYSE: AMD) posted a Q2 loss of $1.10 a share, excluding one-time items, compared with last year's loss of $0.45. Analysts had predicted a loss of $1.26 after the company came out with an earnings warning last month. Separately, AMD's president and chief operating officer, Atiq Raza, resigned for "personal reasons." Raza was widely seen as heir apparent to Chairman and CEO W.J. Sanders.

National Semiconductor (NYSE: NSM) will announce that it has put most of the functions of a PC on a single chip, The Wall Street Journal reported. The Geode SC1400 combines 43 different chips onto a single chip and is intended to serve as the brain of "information appliances," hot new devices designed to provide easy access to the Internet.

Airline operator US Airways Group (NYSE: U) said second-half earnings will fall short of analysts' expectations due to slower revenues and higher costs for labor and fuel. The company was expected to post earnings of $1.66 a share in the third quarter and $1.31 in the fourth, or a combined $2.97.

Earnings To Go

(Quarterly earnings per share versus that of the same year-earlier quarter and compared with analysts' mean estimate. Earnings exclude one-time charges and gains.)

  • Applied Micro Circuits (Nasdaq: AMCC) -- fiscal Q1 EPS: $0.24 vs. $0.15 last year; estimate: $0.22
  • Coca-Cola (NYSE: KO) -- Q2 EPS: $0.38 vs. $0.47 last year; estimate: $0.38
  • Incyte Pharmaceuticals (Nasdaq: INCY) -- Q2 EPS: loss of $0.26 vs. profit of $0.18 last year; estimate: loss of $0.22
  • Inktomi (Nasdaq: INKT) -- fiscal Q3 EPS: loss of $0.10 (before charges) vs. loss of $0.15 last year; estimate: loss of $0.12
  • Rambus (Nasdaq: RMBS) -- fiscal Q3 EPS: $0.08 vs. $0.07 last year; estimate: $0.06

More Foolishness

Check out this week's Dueling Fools argument on blue chips vs. small caps... Read Louis Corrigan's take on Best Buy... Jeff Fischer evaluates Amazon in his Rule Breaker Portfolio report... See what Fools are talking about on our message boards.

Also, check out the Lunchtime News at 12:30 p.m. for updates on the top stories of the day, and remember to start each business day with Breakfast With the Fool at 9 a.m.

Let us know what you think of this feature. Send all comments and suggestions (including Foolish quotes) to the Breakfast Fools.

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