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Apple refines hit list

As the final draft of the product "hit list" is drawn up at Apple, current and former company executives say CEO Gil Amelio is having trouble severing the ties completely.

As the company gears up for the formal announcement this Friday, the specifics of which products will end up on Apple Computer's (AAPL) chopping block are beginning to materialize.

As part of a restructuring that will include 3,000 to 4,000 layoffs, the company will step away this week from several of its product lines that aren't strategically important or are proven money-losers. But as the final draft of what CEO Gilbert Amelio has called the "hit list" is drawn up within Apple headquarters, current and former company executives say the troubled computer maker is having trouble severing the ties completely.

Sources close to the ongoing negotiations say that Amelio has been reluctant to cut entire divisions from the company and is instead picking off programs and projects here and there.

This approach may receive a cold reception from Wall Steet on Friday. The heavy investors want Apple to announce wholesale cuts in its operations rather than have it cherry-pick products.

With revenues to drop by about $1 billion this year, Apple must cut $400 million from its operating costs this year if it is to become profitable by its stated goal of September. Unless whole divisions are eliminated, many analysts are unsure if Apple can achieve that goal.

Some decisions have already been made, however, although mostly for less significant products. According to one executive, the hit list so far includes the following:

  • Webcasting technology;
  • Scanners;
  • A planned 21-inch monitor called "Big Brother."
  • The networks product group, which produces such items as Ethernet adapter cards and is home to about 150 employees.

    Apple is currently seeking ways to raise money to spin off its Webcasting into a separate business, another executive said.

    While several press reports have speculated that the entire Newton division would also be cut, sources say that as of the end of last week company executives still hadn't decided the division's fate.

    Sources added that the Friday announcement will probably include several outsourcing deals instead of complete elimination of product lines. Apple's scanners, for example, will be outsourced to manufacturers who will actually develop and build the machines but attach an Apple logo to the box.

    "There will a lot more of these OEM (original equipment manufacturers) agreements," said an executive, pointing to the scanners as an example.

    Some companies are already making their relationship with Apple public.

    Personal Computer Products (PCPK), for example, today said it has entered into an agreement with Apple to provide product engineering services for future Apple printers. Additional details were not disclosed, but may be forthcoming this summer, said Brian Bonar, chief operating officer for PCPI.