Ailing Apple Computer Inc. said Wednesday it will take a big dose of strong medicine - a $700 million loss for the current quarter after writing off unsold products and paying for job cuts.
Apple, which lost $69 million in the October-December quarter, had warned several weeks ago of a deeper loss for the January-March period. But the huge figure exceeded Wall Street’s predictions.
Investors were glad Apple appeared to deal with all of its financial trouble at once and sent the company’s stock higher. It was up $1.37-1/2 to $25.25, a 6 percent jump, in Nasdaq trading.
“They’re taking the opportunity to write off everything they can possibly write off. … They may as well get all the bad news out as soon as possible and then rebuild the company,” said Eric Lewis, an analyst with International Data Corp. in Mountain View, Calif.
“They’re doing the right thing by taking the big hit now - both from a financial and a public relations standpoint,” he said.
Apple’s new chairman, Gil Amelio, said revenues and shipments would be “substantially below” the January-March quarter compared with a year ago, when it earned $73 million on sales of $2.65 billion.
That is prompting Apple to write down the value of its inventory, which ballooned after the company seriously misjudged demand at the end of last year. The situation was hurt further by a slowdown in overall demand for PCs in recent weeks and customer uncertainty during a period in January when Apple was the subject of takeover speculation.
More than half the $700 million loss will go to writing down inventory, and about a quarter will go to restructuring charges. Earlier this year, Apple started laying off 1,300 of its 14,500 employees.
“The inventory write-downs and restructuring charges are critical first steps in orchestrating the comeback of the company,” Amelio said.
Amelio became Apple’s chairman and chief executive officer two months ago. He brings a reputation for turning troubled companies around.
By early May, Apple will unveil details of its plans for remaking its future, Amelio said.