Apple Computer Inc., caught between high costs and falling prices, will lay off at least 1,300 employees as part of a reorganization it hopes will boost both its bottom line and position in the market.
Apple announced the "initial phase" of its restructuring on Wednesday along with its financial results for the last three months of 1995. The company lost $69 million and warned of more red ink.The company's announcement came after financial markets closed. Its shares closed at $34 a share, down 371/2 cents, on the Nasdaq Stock Market.
Industry analysts said the restructuring makes sense. But at least one wondered whether the troubled personal computer pioneer - with a history of poor execution - would be able to carry it out.
"It is certain they have to make things happen quickly," said Robert G. Herwick, president of Herwick Capital Management in San Francisco.
"There are two issues. . . . One, are they doing it fast enough, and are they doing it aggressively enough? And second . . . can they execute on this in a way that will preserve their market position and enhance it?" he said.
Apple, as expected, also indicated that it would back out of the entry-level personal computer business where it has not made money.
It said it would focus on more profitable, "best-of-class" products in key markets, including the home, education and publishing. Meanwhile, the company promised to get additional companies to clone its Macintosh computer.
"(Apple) can no longer be all things to all people. And it must emerge as a company that focuses on products that they do well," said Tim Bajarin, president of Creative Strategies Research International.
Apple's loss for the three months ended Dec. 29, its first fiscal quarter, amounted to 56 cents a share. The company earned $188 million, or $1.55 a share, in the same period in 1994.
The company also forecast a loss for the second fiscal quarter and said that loss would be worsened by a $125 million charge to pay for the restructuring.
Sales in the latest quarter rose 11 percent, to $3.1 billion from $2.8 billion. And unit shipments grew 12 percent to 1.3 million.
That's the highest volume ever for Apple, based in Cupertino, Calif. But it was below internal targets and sharply behind the overall industry's growth, which means the company lost market share.
The company's gross profit margin fell to 15.1 percent of sales during the quarter, down from 20.7 in the previous quarter and 28.7 a year ago. Apple blamed a holiday-season price war in the United States and Japan, its two largest markets. An $80 million write-down of inventory to reflect falling PC prices also depressed the margin.
"The most immediate and obvious work we must undertake is to quickly streamline operations. The work-force reduction is a necessary first step," said Michael Spindler, Apple's president and chief executive officer.
The 1,300 layoffs, about 8 percent of Apple's work force, will take place over the next year. Most will be in sales, marketing and administration, Spindler said.
Industry analysts had speculated that Apple could lay off up to a quarter of its more than 14,000 employees. It was not immediately known if further reorganization would mean more job cuts. Analysts, however, said further layoffs were likely.
Apple's troubles have sparked speculation about whether Spindler would be among those to lose his job. But the company's announcement did not mention any change in his position or responsibilities.