September 26, 1997: In one of his first assignments after returning to Apple as interim CEO, Steve Jobs reveals the company’s massive quarterly loss of $ 161 million.
Giving investors the bad news is lousy, but things are about to change dramatically for Apple.
Apple’s biggest loss is not as bad as it seems
First, Jobs did not cause Apple’s biggest loss ever. The earnings bloodbath stemmed from decisions made by Jobs’ predecessor, Gil Amelio. During Amelio’s 500-day rule at Apple, the company lost as much as $ 1.6 billion. It wiped out essentially every percent of the profits Cupertino earned since the 1991 financial year. ->
Amelio eventually stepped down from his role in running Apple on July 7. Jobs took over the operation of the company, while he is apparently looking for a replacement.
More importantly, the $ 161 million loss actually reflected some good things that started at Apple. The loss included a $ 75 million write-off when Apple repurchased the Mac OS license from Power Computing. This signaled the end of the catastrophic “clone Mac”.
Mac OS 8 increases Apple’s bottom line
Apple was also encouraged by the recent launch of Mac OS 8, which sold a whopping 1.2 million copies in its first two weeks. It marked the most successful sales performance for an Apple software product at the time.
Although Mac OS 8 was not enough to give Cupertino back profitability, the new operating system significantly exceeded expectations. It also showed that Apple still benefited from a massive, supportive fan base.
“We remain focused on our primary goal of giving Apple back to sustainable profitability,” said Apple CFO Fred Anderson when the company’s grim quarterly numbers were unveiled. “Our goal for fiscal year 1998 is to continue to reduce Apple’s break-even points through a combination of further cost reductions and gross margin improvement.”
As with Apple’s current “under-promise and handover” strategy, the forecast turned out to be too cautious. The company performed quite well the following year.
The big Apple round begins
Although it sounded a bit ridiculous in a year that saw Apple’s worst loss ever, 1998 marked the beginning of a turnaround operation. The company released the iMac G3 that year, and returned to profitability next quarter. And Apple has not slowed down since.
But before that, Apple had to get through this disappointing earnings call. Shareholders willing to stay a little longer reaped great rewards. Today, Apple has a value approaching 2 trillion dollars, after passing the milestone earlier this year.