Apple cut 375 of a planned 425 jobs in the first quarter 2002, the company has revealed in its Form 10Q financial quarterly statement filed with the US Securities and Exchange Commission (SEC) yesterday.
Employees were shed from operations, information systems and administration. The losses came as Apple trimmed costs to cope with economic recession, and identify finance for product development. The company announced a restructuring cost of $24 million related to these cuts.
Apple’s report says: “The restructuring plan includes significant changes in the company’s information-systems strategy, resulting in termination of equipment leases and cancellation of existing projects and activities.”
Apple’s 27 retail stores accounted for 14,000 Mac sales – 1.9 per cent of the 746,000 sold during the quarter. A total of 44 per cent of the $48 million revenues generated by the stores related to software and accessories.
The report goes on to predict that net sales “will rise sequentially during the second quarter of 2002 to approximately $1.5 billion”.
However, Apple expects second-quarter earnings to be flat in comparison to Q1, though its second-quarter operating expenses should fall by $10 million to $15 million. This fall in expenses is attributed to “seasonally lower advertising and promotional expenses”.
The report echoes Apple chief financial officer Fred Anderson’s prediction in January that gross margins are likely to fall.
The report is more specific about this, warning that gross margins will decline “significantly”. Of this, it says: “This is due to aggressive pricing on the new iMac, temporary incremental production and freight costs associated with the introduction of the new iMac, and expected increases in certain component cost including memory and flat panel displays.”
Defiance on lawsuits
The report also offers Apple’s management’s assessment of the various legal actions outstanding against the company.
With regard to allegations that Apple misled investors purchasing the company’s stock between July 19, 2000, and September 28, 2000, the report reveals: “The company believes these claims are without merit and intends to defend them vigorously.”
Describing this litigation, the report reads: “Beginning on September 27, 2001, three shareholder class action lawsuits were filed in the District Court for the Northern District of California against Apple and its CEO. The lawsuits are essentially identical, and purport to bring suit on behalf of those who purchased the Company’s publicly traded common stock between July 19, 2000, and September 28, 2000. The complaints allege violations of the 1934 Securities Act and seek unspecified compensatory damages and other relief.”
On other outstanding litigations, Apple’s management says: “It does not have a potential liability related to any current legal proceedings and claims that would have a material adverse effect on its financial condition, liquidity or results of operations.”
The report also reveals an outstanding problem with the US inland Revenue Service, which in February 2001 “proposed adjustments” to Apple’s tax returns between 1995 through 1997. Of this, Apple says: “We disagree with most of the proposed adjustments and are contesting them through the IRS Appeals Office.”
Apple believes that “adequate” provision has been made for any tax adjustments made.
Europe income engine room
Apple’s financial statement shows the company achieved an operating income of $43 million in Europe. This is higher than that achieved in any other territory, including the Americas, where operating income was $38 million.
The company drew $30 million in Japan, and $19 million in “other segments” in the period, losing $8 million at retail. These results contrast favourably with its year-ago results, when it lost money in three major markets.
The full report is available to view at Nasdaq.
Apple’s shares closed up 3.95 per cent at $24.98, remaining stable on the extended trading market.