It’s an interesting study in contrasts. Apple yesterday reported a quarterly profit of US$40 million. Apple’s earnings were in line with previously offered guidance, much to the delight of financial analysts who lauded the company’s management during a conference call yesterday. Compare that to PC manufacturer Gateway, which today posted a first quarterly loss of $123 million.
Gateway’s results seem more or less in line with what analysts expected. Excluding pretax charges, the company lost about $60 million, or about 20 cents per share — just what analysts predicted. Analysts had pegged the company’s quarterly revenue in the same ballpark as what Gateway reported: $992 million.
Gateway said that the quarterly loss is inline with previously offered guidance and said that losses should narrow as the company cuts prices. And compared with its first-quarter results for 2001, the company has greatly improved — for the same quarter last year the company lost a sizeable $502.9 million.
Gateway plays second fiddle to Dell in the direct PC sales game. Like Apple, however, Gateway has a chain of retail stores where customers can walk in and order or walk away with a Windows-based system.
For Gateway chairman and CEO Ted Waitt, it’s all about marketshare. The company gained marketshare during the quarter even though it lost money, and he said they don’t intend to let up. “We’ve sharpened our focus and these results clearly show that we are achieving the desired results from our aggressive value pricing strategy, thereby advancing toward long-term sustainable profitability,” said Waitt.
Microsoft continues to practically print money. The company has announced revenue of $7.25 billion for the quarter ended March 31, a 13 percent increase over the $6.40 billion reported in the prior year.
The company’s operating income totaled $3.30 billion compared to $3.00 billion in the prior year. Net income for the quarter was $2.74 billion, which includes an $847 million after-tax gain on the sale of Expedia and an $806 million after-tax charge related to investment impairments. Diluted earnings per share for the March 2002 quarter were $0.49, including a $0.15 gain on the sale of Expedia and $0.14 investment impairment charge as noted above.
For the current quarter (which ends June 30) Microsoft is predicting revenue in the range of $7.0 and $7.1 billion. Operating income is expected to be in the range of $2.9 and $3.0 billion, and diluted earnings per share is anticipated to be $0.41 or $0.42.
All is not rosy in Redmond, though, especially when it comes to the company’s efforts break into the enormously lucrative video game console market. Despite a huge marketing push to get consumers to buy Microsoft’s Xbox console in North America, Japan, and Europe, the company isn’t selling nearly as many of the powerful gaming systems it thought it would.
Earlier today Microsoft indicated that it would try to bolster weak European sales of the Xbox console since its introduction there six weeks ago by reducing the price from €479 to €299 (£300 to £199 in the U.K.), thus pegging the Xbox at the same price as the more successful Sony PlayStation 2. Sales have been similarly off the mark in Japan, as well, although Microsoft hasn’t cut prices there yet. But perhaps Microsoft CFO John Connors’ news during a conference call following the quarterly financial numbers is more telling: He told analysts that Microsoft has downwardly revised its Xbox sales significantly for its fiscal year 2002. While Microsoft initially hoped to ship 5.5 million to 6 million Xbox consoles by the end of June, it now hopes instead to ship a scant 3.5 million to 4 million units.
Sun Microsystems, one of Microsoft’s rivals, reported pretty much flat results for the fiscal third quarter that ended March 31. Revenues for the third quarter were $3.1 billion, compared with $3.1 billion in revenues reported for the second quarter of fiscal year 2002.
Net loss for the third quarter was $26 million and the net loss per share was $.01. Still, this was a sequential improvement of 67 percent over the net loss per share reported for the second quarter of fiscal year 2002 (excluding losses incurred during such periods on Sun’s equity investment portfolio, restructuring charges/adjustments, and related tax effects). What’s more, during the fiscal third quarter of 2002, special items increased the net loss by $11 million, resulting in a GAAP net loss of $37 million and a GAAP net loss per share of $.01.