Apple Computer is beginning to falter. Again. After returning to profitability in early 2001 by seducing consumers with candy-colored iMacs and must-have accessories, the Cupertino, Calif.-based company reported some slippage in its fourth quarter, which ended September 28.
Revenue for the quarter was $1.44 billion, flat with the same period last year and equating to a net loss of $45 million, or 13 cents per share. Last year, Apple made a net profit of $66 million. Company brass said that despite the 14% drop in unit sales, the popularity of products such as the 17-in. flat-screen iMac were exceeding expectations.
Another bright spot was Apple retail stores. In the quarter, Apple opened nine new stores, for a total of 40. Retail revenue increased to $102 million, from $63 million in the previous quarter; unit sales had also increased per individual store, from 20,000 to 34,000.
According to Barry Bourbon, a senior associate at Gensler, the architecture firm commissioned to design Apple's non-flagship locations, Apple's run on malls has helped expose its “products to people who don't have familiarity with them” and to expand market share, which is now less than 5%.
Apple may tap new markets, but Bear Sterns research analyst Naveen Bobba warns that the party won't last forever. “The store has strengths, but at the same time, it doesn't come cheap. We can't think of any computer manufacturer who ever did well with a retail effort,” he says. Moreover, Apple's spectacular numbers are due to the fact that “they're going from a small base.” Bobba adds, “The real measure is looking a year out from now.”
Nonetheless, Bobba concedes that Apple will probably continue an aggressive store rollout that shifts revenue expectations onto the retailing effort. Between the end of the fourth quarter and Thanksgiving, Apple opened 10 additional stores, and in December, Apple will open retail locations in Denver, Pasadena, Calif., Oak Brook, Ill. and Highland Park, Texas.