Apple Defies Predictions Surprise Earnings Linked To Cost Cuts, Strong Sales

Apple Computer Inc. sent its stock soaring 20 percent Tuesday by saying it would report a surprise quarterly profit, helped by cost cuts and strong demand for its new computers.

Apple predicted it would earn more than $45 million in its fiscal first quarter, which ended last month. Wall Street analysts had expected a loss of $10 million. The financial results are due out next Wednesday.

Apple has been struggling to regain a shrinking market for Macintosh machines and return to profitability after losing more than $1.8 billion over the past two years.

The company’s stock jumped following the announcement, rising $3.06-1/4 to close at $18.93-3/4 per share in trading on the Nasdaq Stock Market.

The company also appeared to stabilize an alarming slide in revenue, saying it expected to report $1.58 billion in revenue for the three months ended Dec. 31 - roughly even with the previous three months.

In the year-ago quarter, Apple lost $120 million on $2.1 billion in sales. The company has not reported a profit since the summer of 1996.

“I can tell you I think for sure Apple is coming back,” Apple acting chief executive Steve Jobs told several thousand people at the Macworld Expo show in San Francisco.

Jobs’ announcement came at the end of his 90-minute keynote speech, in which he detailed the company’s attempt to erase nearly two years of red ink and a steep slide in market share.

Last fall, Apple introduced faster Power PC computers. The Macintosh users, resellers and software developers in the audience cheered Jobs’ announcement.

Apple Chief Financial Officer Fred Anderson said that demand was unexpectedly high for Apple’s more profitable machines.

But analysts cautioned that much of the profit was due to steep cost-cutting, including thousands of layoffs last year, and didn’t represent a fundamental revival in Apple’s business.

“They did what they had to do to get there,” said Jean Bozman, an industry analyst with International Data Corp. in Mountain View, Calif. “Let’s not forget they had to lay off a lot of people.”