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Wednesday, 18 July, 2001, 05:36 GMT 06:36 UK
Apple warns of trouble ahead
Apple iMac computer
Apple's iMac models have reinvigorated the company
Personal computer maker Apple has seen its profits fall by 70%, and warned of tough times ahead.

The firm reported profits of $61m in the third quarter, sharply lower than the $200m in the same period a year earlier.

And, speaking on the eve of the twice-yearly Macworld trade fair, chief financial officer Fred Anderson said he was "not counting on" and imminent recovery.

"We have not seen any signs of an upturn in the consumer PC market," he said in a conference after the close of US stock markets.

The forecast concerned Wall Street, where Apple shares fell $2.35 to $22.75 in after-hours trading.

Revival strategy

Nonetheless, Apple shares have been one of the top performers in the US this year, rising by two thirds, as investors have warmed to the revival strategy being rolled out by Steve Jobs, the firm's co-founder, who has returned as chief executive.

Steve Jobs, chief executive, Apple
Steve Jobs: has spearheaded Apple's revival
And Apple's third-quarter profits, which were in line with analysts' forecasts, were higher than the $40m earned in the three months before.

Sales came in at $1.48bn, compared with $1.43bn the quarter before and $1.83bn a year ago.

Much of the recent rise in sales was credited on a strong performance by the iBook notebook computer, introduced on 1 May.

"[Apple] seemed to hit a sweet spot in the market with the iBook," UBS Warburg analyst Don Young said.

The firm also reported strong sales to schools. "Education is humming," Mr Anderson said.

Key show

Apple is expected to bolster future revenue with new products which may be unveiled by Mr Jobs at Wednesday's Macworld show, in New York.

Observers are predicting the launch of a budget-priced iMac desktop model.

"This is probably the biggest challenge facing Apple going forward," said David Bailey, analyst at Gerard Klauer Mattison.

"Because of the narrowness of their customer segments they are more dependent on product introductions than other PC manufacturers."

Product shelved

After losing nearly $250m at the end of 2000, the computer maker vowed to return to profitability.

Apple has lived up to its word, driven in part by strong demand for an attractive new laptop computer.

But a lagging PC sector combined with the company's misstep around its G4 Cube computer have shaken investor confidence in the company.

Apple abandoned its ultra-modern G4 Cube earlier this month, saying it would suspend production of the personal computer indefinitely.

The company opened its first two retail stores last quarter and plans to open 23 more this year.

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