ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, February 9, 1996 TAG: 9602090078
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: CUPERTINO, CALIF.
SOURCE: Bloomberg Business News
Apple Computer Inc. said it isn't in merger negotiations and reports of such talks are hurting sales, which will make its second-quarter loss wider than expected.
Apple said the loss for the quarter ending March 31 will be ``significantly'' larger than the previous quarter's loss of $69 million. Apple last month said it expects a loss and a charge of at least $125 million in its second quarter for firing 1,300 people and inventory writedowns.
The wider loss is the latest evidence of Apple's severe financial problems and represents the first time in more than five years that the company will have two straight quarterly losses. Apple's new chief executive, Gilbert Amelio, isn't expected to return the corporation to profitability before its fourth quarter, analysts said.
``It's going to be a formidable task,'' said Marian Kessler, portfolio manager at Crabbe Huson Group, which owns about 1 million Apple shares. ``It's going to be a tough battle for Apple to regain some of its stature.''
Amelio also isn't likely to merge the No.3 personal computer maker with another company. Apple said in a statement that it ``is not currently in merger discussions with any party.''
The statement skirted the issue of whether it had been in talks with Sun Microsystems Inc., as reported during the past three weeks.
``As a matter of policy, we never comment on these things,'' said Apple spokeswoman Lynne Keast. ``Because this has taken on a life of its own, we felt we had to come out and say something.''
Asked whether Apple was in talks with Sun during the past three weeks, Keast said, ``Everything is in the press release. Beyond that, we are not going to say anything.'' Sun officials didn't return calls for comment.
Apple blamed the takeover reports for several problems. The speculation had a ``destabilizing effect ... on our business and our organization.''
Apple last week fired former CEO Michael Spindler, replacing him with Amelio, former CEO of National Semiconductor Corp. and an Apple director. Several vice presidents and other Apple employees have left the company in recent weeks amid concern that Apple wouldn't survive as a separate company.
Merger speculation also had ``an adverse impact ... on customer-buying decisions,'' Apple said.
Some investors said that Apple mishandled the problem by not making a clearer statement on its plans. ``If that was really a concern, the company could have come out with a statement a month ago,'' said Gary Kaminsky, portfolio manager at Cowen & Co., which owns Apple stock. ``Now it's over and time to move forward.''
Apple faces a tough road. Price wars in the PC industry forced Apple to cut prices on its machines, most recently by 11percent on some Macintosh PCs. Apple's profit margin shrank to 15percent in the last quarter from 20.7percent in the fiscal fourth quarter.
Its PCs lost market share in 1995 amid competition from less-expensive PCs running Microsoft Corp.'s Windows software. Apple's share fell to 7.8percent from 8.3percent in 1994. The company slipped to No.3 from No.2 among personal computer makers last year behind Compaq Computer Corp. and International Business Machines Corp.
Apple's stock is down 44 percent from a 12-month high of 493/8 on June 21. It fell 3/8 Thursday to 277/8.
Amelio is expected to boost profits and share price, analysts and investors said. He will be able to shrink Apple's old inventory and fire people, eliminating a drag on earnings, Kaminsky said.
Wall Street analysts forecast that Apple would post a loss from operations of 41cents a share for the quarter ending in March, according to a recent survey of 23 analysts by IBES International Inc.
Amelio, who is known as a turnaround expert, will do ``whatever is necessary'' to return the company to profitability, Kessler said. And he is not afraid to move quickly.
``Amelio is really in charge,'' said industry analyst Tim Bajarin of Creative Research Strategies. ``He's made a decisive statement, and he's cleared the air. That is a major step in the right direction.''
LENGTH: Medium: 78 linesby CNB