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Money: iPod buzz is hiding problems at Apple

updated 07:20 pm EST, Wed March 17, 2004

iPod buzz masking problems

MONEY Magazine's article titled "" says the buzz on the digital music player and "swank" storefronts are masking an ebbing bottom line, noting reduced CPU sales (resulting a shrinking marketshare), decreased profits (in part due to the lower-margin iPod and little-to-no profit at the iTunes Music Store), failure of the iPod to drive CPU sales, failure of the retail stores to increase marketshare, hidden retail store costs, no operational income, and little value in the stock. [subscription required to view entire article; highlights posted below]


  • "Apple sold just over 3 million computers in its last fiscal year, which ended in September -- 900,000 less than it sold in fiscal 1996, the year before Jobs returned...Meanwhile, Apple's share of the worldwide personal-computer market has shrunk to 2 percent from 3.2 percent five years ago."


  • "While Apple's sales of $6.2 billion last fiscal year were nearly unchanged from 1999, profits plummeted 90 percent to $69 million, from $601 million four years ago...Jobs' mass-appeal strategy has crimped the company's historically high profit margins. Apple's net profit margin is just 1 percent. That's down from 10 percent four years ago."





  • "Out of the hundreds of people who were waiting outside Apple's SoHo store in the cold to buy an iPod, I could find only one whose positive experience with the music player led him to buy an Apple computer."



  • "Tom Santos, one of the plaintiffs, estimates that Apple's stores would have lost as much as $80 million in 2003 had they been paying the same prices for inventory as the resellers paid."




  • "And Apple's earnings would have been worse had it not been for $4.8 billion the company has in cash and short-term securities. In fact, the cash hoard made more money last year than Apple's operations -- which lost $1 million while the computer maker booked a $69 million gain on interest income."



  • "Even when you factor in Apple's $13 a share in cash and almost no debt, the company's stock, at a recent $23, trades at 20 times estimated 2004 earnings. Dell's shares, on the other hand, go for 26 times projected 2004 earnings -- but its business is three times as profitable as Apple's."




by MacNN Staff

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Comments

  1. QualleyIV

    Joined: Dec 1969

    0

    Doesn't add up...

    At first glance, this just looks like a bunch of FUD. However, just a couple of questions. First, whhere was MONEY four years ago? Were they out there being bullish on Apple? I don't think so! They were right there with all of the other mass media outlets predicting Apple's demise. And it looks like again, after quater after profitable quater, Money is back to criticize. Never mind the fact that Apple was one of the ONLY companies to make money in a very bad tech market, or the fact that they are COMPLETELY debt free with a TON of cash. That doesn't mean anything. Instead, let's go invest in some sinkhole telecommunications company that has money on paper but 10 or 20 billion in actual debt...

    Oh and let's forget about that cheap lead-item iPod. I mean, they aren't the MOST EXPENSIVE MP3 player on the market (wonder what the margins are like on those). BTW, aren't there companies out there that JUST sell MP3 players? I guess they must be REALLY bad investments...

    This is BS...

  1. typoon

    Joined: Dec 1969

    0

    Load of poo

    I agree with the first poster. It DOESN'T add up. I agree with everything they say that "This is BS..." It is, sounds like the doom and gloom we heard in the 90's. Apple's motto once again.

    Apple Computer going out of business for the past 30 years.

    AS they said in Eposiode 1 This is Batha Poodoo

  1. DeepDish

    Joined: Dec 1969

    0

    BS or not, it made me thi

    BS or not, it made me think.

    For the love of God, why don't more people buy macs?

    I fix pcs and macs all day long and I am amazed people put up with pcs at all.

    I know macs are great, why doesn't the rest of the world?

  1. gilrain

    Joined: Dec 1969

    0

    I hope not!

    I hope it doesn't add up! I'm a very recent convert, from being a die-hard PC fan and professional technician, and I don't want to see Apple die just when I realize how wonderful they are! That would be like some horrible Greek tragedy.

    Anyway, I'm buying a new G5 when they come out (23rd I hope hope hope!), so maybe that will boost sales a little. Also, a coworker of mine, another PC technician, is also switching sometime this summer!

    Now that I've found them, I want to use Apple computers for the rest of my life. Don't die on me, Apple!

  1. iKenny

    Joined: Dec 1969

    0

    The reason...

    I've given a lot of thought to why more people don't buy Macs, and it comes down to something very simple: the business world. Apple stands out as a creative, innovative company with the iPod, iLife, colorful, well designed products, and Hollywood support. However, most Americans go to work, sit down in front of a PC, use it not knowing there's anything better, then go home and get a PC because they have one at work. When they find out about the Mac, they say, "That's really great!" and then never get one because "the office uses PCs, and Macs aren't PCs."

    I believe one of the only ways Apple can rectify this problem is to market its operating system to businesses, not consumers. Point out the networking support, easy set up and use, security features (but NEVER lack of viruses; it might encourage attacks on OS X), and all that good stuff. Show how everything just works on a Mac. Apple needs to run two businesses at once: the creative, digital hub and at the same time the boring, business stuff, ensuring that IT guys and their bosses see Macs and their potential.

    The final thing Steve himself can do is to convince just one major corporation or organization (GE, World Bank, etc.) to switch. He can use the same charm he used on the record label CEOs on this one company's CEO, showing off the Mac. Then make a huge deal out of the productivity gains, the money saved, etc. Apple has to get themselves seen as not only a creative player but a powerful business player as well. Only then can Apple truly break out of its 2%.

    Oh yeah, about the article. I read the whole thing and noticed that they have this shocker title but then they don't actually say much about Apple's future, just that the facts don't look so good right now. They've learned never, ever, to predict the end of Apple anymore, because after 30 years of trying, they haven't yet gotten it right. It doesn't look good for them. Apple, I think, will keep chugging along, but unless they take serious action in the business sector, everything will remain the same.

  1. noka

    Joined: Dec 1969

    0

    illogical comparison...

    He's comparing numbers from 2 different economies... (healthy in late 90's when everyone was spending cash like it was goin outta style and stingy, weaker economical current status)

    BUT... a good point IS brought up in this... why IS apple's marketshare so low???

    Us Mac users know Mac's are great... why doesn't anyone else??

    Seems like that's something Apple should focus on ;)

  1. iKenny

    Joined: Dec 1969

    0

    One more thing

    Hehe sorry. Just as an addition to my giant comment above: I was very pleased to see Apple's move today to make the first thing someone sees on the Apple homepage all the positive press about the G5. That's Apple getting proactive.

  1. iJed

    Joined: Dec 1969

    0

    Headless iMac

    I think making a headless box would greatly expand marketshare for Apple. The only desktop Mac I would consider buying anymore is the PowerMac range because I don't want to have to replace my expensive display on every upgrade.

  1. dlefebvre

    Joined: Dec 1969

    0

    Once again

    If we are to believe all those articles, Apple has ben bankrupt and closed down 10 years ago...

  1. rok

    Joined: Dec 1969

    0

    Apple...

    "Proudly going out of business for twenty years..." ;-)

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