AT LARGE: A beleaguered saga

Ever get the feeling you've experienced something before? You walk into a place you're sure you've never been, but somehow it seems familiar? Someone speaks to you, and you get the feeling you knew what they were going to say before they said it?

I've been getting that feeling lately. By the time you read this, it will have been about two weeks since Apple Computer announced its September quarter profits will be lower than expected. Several times in those couple of weeks I've been checking to make sure I'm not dreaming it's 1996 again.

The primary bit of information I've had to keep going back to is that the announcement says the company's profits will be lower than expected. It'll make $US110 million (instead of the expected $165 million) on revenues of roughly $1.9 billion. This it puts down to slower than expected iMac sales, soft education sales and a poor takeoff for the G4 Cube.

The interesting thing I noted about the announcement was that it came from Fred Anderson, the company's CFO (and the person who, in 1997, was originally named as interim CEO to replace Gil Amelio - bit of trivia for you). I haven't seen his name on an Apple announcement for a considerable period of time. The deal seems to be that Steve gets to announce the good news, Fred handles the bad news.

In response to this, investors have dumped the company's stock like leftover hot dog buns. Within minutes of the announcement (made after the markets had closed), after-hours trading had knocked down half the company's value. The slide has continued, although more slowly, to the point where the company is currently trading at about a third of what it was two weeks ago.

The markets were not that vicious back in 1996, when Amelio announced that the company had lost $768 million and would have to sack a goodly chunk of its workforce. That was seen as fiscally responsible and a necessary adjustment, given the damage done by Michael Spindler in his time as CEO.

As you know, I'm no believer in the whimsy of the markets. The way I figure it, investors have got themselves all confused about what Apple Computer is. They think, because Jobs emerged from the inky blackness of NeXT in 1997, that this company is one of the hot, high-flying "new economy" companies they've heard so much about. They don't realise it's really the same, lumbering, multibillion-dollar "old economy" company that Spindler and Amelio led to the edge.

A quick primer on the difference: "New economy" companies such as Amazon, Yahoo etc don't make money. They exist to manipulate the whimsy of the markets. Profitability is irrelevant, share price is king. "Old economy" companies (even newish ones like Apple and Microsoft) make money. The investors have obviously become confused, upon reading that Apple will make $110 million dollars in profit, and written the stock down because Amazon doesn't ever do that. In the "new economy", if you don't do like Amazon, that must be bad.

Even more scary than the market response, though, has been the media response. As I said, it's only been a couple of weeks, yet I've already counted four articles describing Apple as "embattled", two as "besieged" and three as "beleaguered" (there is overlap between these articles). I've even seen two articles calling for the immediate sacking of Jobs as CEO.

Now, I have to say, I have rarely seen the word "beleaguered" used by journalists in any context other than articles about Apple Computer. It used to be used so often that potential investors would be put off by not being able to find "beleaguered Apple" on the Nasdaq index. I haven't seen the word for several years, since the success of the iMac presumably sent the leagues from the gates. But it's back in force. There must be a few new journalism graduates out there who rue having missed their chance to use it years ago.

(It's also worth pointing out that I despise articles in the media that criticise the behaviour of the media. There's always a tinge of nasty irony to them, leaves a metallic taste in my mouth. Please excuse this transgression).

As for Apple itself, and the leagues in the channel that support it, I say this: remain calm. In spite of all you may have read, Apple is not a soap opera, it is a company. It is a manufacturer of computers, not a religion. And, lower than expected or not, profit is profit.

Matthew JC. Powell swam a PB in the 200 IM, but isn't sure what that means. Coaching tips to mjcpowell@ozemail.com.au

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