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 Apple.
Apple’s loss isn’t quite as bad as it seems
For one thing, it should be noted that Jobs was not responsible for the losses, which essentially followed paths laid out by Jobs’ predecessor, Gil Amelio. During Amelio’s 500-day reign at Apple, the company lost a massive $1.6 billion — essentially wiping out every cent of profit Cupertino had earned since fiscal 1991.
Amelio ultimately 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 loss actually reflected some good things that were starting to occur at Apple. The $161 million loss included a write-off of $75 million as Apple bought back its Mac OS license from Power Computing, signaling an end to the disastrous “clone Macs” era.
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.
Mac OS 8 wasn’t enough to claw Cupertino back into profitability, but it 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, it was an overly cautious forecast of how Apple would perform the following year. While it may have sounded ridiculous in a year that saw Apple’s worst-ever losses, 1998 turned out to be the beginning of a turnaround that Apple hasn’t ever slowed down from. 1998 was the year of the iMac G3 and Apple’s return to profitability the very next quarter.
But before that, Apple had to get through this disappointing earnings call. The shareholders willing to hold on for a little bit longer were certainly rewarded, though.