September 26, 1997: In one of his first tasks 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 miserable, but things are about to change dramatically for Cupertino.
Apple’s biggest loss isn’t quite as bad as it seems
For one thing, 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 reign at Apple, the company lost a massive $1.6 billion. That essentially wiped out every cent of profit Cupertino earned since fiscal 1991.
Amelio stepped down from his role running Apple on July 7. Jobs took over running the company, while supposedly looking for a replacement.
More importantly, however, the $161 million loss actually reflected some good things starting at Apple. The loss included a $75 million write-off as Apple bought back its Mac OS license from Power Computing. This signaled the end of the disastrous “clone Macs” era.
Mac OS 8 boosts Apple’s bottom line
Apple was also buoyed by the recent launch of Mac OS 8, which sold an enormous 1.2 million copies in its first two weeks. That marked the most successful sales performance for an Apple software product at the time.
Although Mac OS 8 wasn’t enough to claw Cupertino back into profitability, the new operating system significantly outperformed many expectations. It also demonstrated that Apple still benefited from a massive, supportive fan base.
“We remain focused on our primary goal of returning Apple to sustained profitability,” Apple CFO Fred Anderson said when the company’s on-the-face-of-things dismal quarterly numbers were announced. “Our goal for fiscal 1998 is to continue to reduce Apple’s break-even point through a combination of further expense reductions and gross margin improvements.”
As with Apple’s current “under-promise and over-deliver” strategy, the forecast proved overly cautious. The company performed quite well the following year.
The great Apple turnaround begins
While it sounded somewhat ridiculous in a year that saw Apple’s worst-ever losses, 1998 marked the beginning of a turnaround. The company released the iMac G3 that year, returning to profitability the very next quarter. And Apple hasn’t slowed down since.
But before that, Apple had to get through this disappointing earnings call. Shareholders willing to hold on for a little bit longer reaped great rewards, though. Today, Apple’s market cap sits north of $2.4 trillion.