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Productive moves for Apple

In its second reorganization in 13 months, Apple Computer seems to be delivering on promises of simplifying product lines and focusing on strengths.

In announcing his second reorganization in 13 months, Apple Computer's (AAPL) CEO Gil Amelio

 
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declared that the company's goals would be better met by simplifying product lines and stopping investments in activities "not central to the core businesses."

Today's restructuring announcement represents the bulk of Apple's employment cuts, but Amelio said the company is still evaluating further product cuts, outsourcing options, and the possibility of spinning off some units.

Amelio added the company will curtail its commitment to developing network- and Internet-related software, as well as its speech technologies and Game Sprockets developer kit, by cutting investments earmarked for those efforts.

In addition, Apple said that it is altering the delivery schedule for the Mac OS releases beyond Mac OS 8, which is slated to ship in July.

Amelio hinted earlier this year that Newton technologies may be dropped. They are still evidently being shopped around to interested parties. When asked if the Newton-based products were among those to be discontinued, Apple's vice president of marketing Guerrino De Luca seemed to indicate that Apple hadn't made up its mind yet.

"One of the very few parts of the company that is not touched by layoffs is Newton. We're keeping the division intact. The reaction of customers and reviewers to the products are very good. We're keeping all the options open regarding the future of Newton within the company," he said.

Products based on the Newton operating system include the MessagePad 2000 and the eMate 300. The MessagePad 2000 is a handheld mobile computer for the business market that features handwriting recognition. The eMate 300 is a low-cost mobile computer for educational markets featuring multiplatform desktop and network connectivity.

The most notable change in the product offerings that seems to fit the restructuring's mandate will be the phasing out of the Performa line of Macintosh computers. In April, the company will introduce new consumer models that will only be sold under the Power Macintosh brand name.

"Every other PC maker on the Intel side has a couple of lines to differentiate their products, but I don't think it's too big a concern for Apple. They hadn't managed [the Performa brand] well to date, anyway," said Kimball Brown, an analyst with Dataquest.

The Performa line was created in 1992 for the retail consumer market and originally featured the 680x0 processors from Motorola. At one point, Apple offered as many as five different product lines aimed at different audiences, each with different names and model numbers. Since last year, the Performa and the Power Macintosh represented systems aimed at consumers and business users, respectively.

"This is an element of simplification of marketing. This has nothing to do with getting out of certain channels," said De Luca. He also stressed that the company isn't ceding the low-margin consumer market or any other market sector to Mac clone makers.

However, Bret Rekas, an analyst with Donaldson, Lufkin and Jenrette, said Apple's decision to shift its low-end Performa consumer PCs to the Power Mac group will not save the company a lot of money.

"It'll just be a box with a different logo. They'll save some money on marketing, but it'll be nominal. You'll still be marketing to the same market and the same group of people," he said.

Not all is doom and gloom for Apple, according to Brown. "We think Apple will have a fabulous year ahead in terms of hardware. They have a notebook that blows ahead of Intel, and across their product line, clock speeds look really good," says Brown.

Brown thinks Apple will be in good position to take advantage of a surge in demand created by an upgrade cycle. What this means is that the company saw strong demand for its products when the Power Macintosh was first introduced, and now buyers are ready to upgrade those machines.

When buyers do upgrade, instead of two full releases of Mac OS in 1998 as previously announced, they'll see one complete release in mid-1998, code-named Allegro, and a full release yearly from then on.

Between the full releases, system improvements such as bug fixes will be made readily available through updates; Apple says it plans to ship two system updates between Mac OS 8 and Allegro.

"That pace is unsustainable from a development point of view and not necessarily meeting most of our customers' requirements...[They] have said they will never be current if we ship a major Mac OS release every six months," De Luca said.

The change frees up resources for work on the next-generation operating system, code-named Rhapsody, he added.

Apple has previously stated that the first version of Rhapsody will be in developers' hands by mid- to late 1997. Customers should be able to get a "unified release" by mid-1998.

The unified release will run any Mac software in a separate window because of what Apple is calling the "Blue Box." The Blue Box is basically the current Mac OS running in a separate window at about the speed of current PowerPC systems. "We've already got portions of Rhapsody up and running, including portions of the Blue Box, which is the Mac compatibility module. We've got some third-party software already running on the system, so we're tracking well relative to our plans," Amelio said.

Just two days earlier, in his keynote at Internet World in Los Angeles, Amelio outlined another distinct plan for the company: Apple's future will remain linked to the Internet.

"We recognize that Apple's future, like yours, is on the Internet. Our position in Internet publishing is one of our brightest spots. Far from jeopardizing our commitment to Internet publishing, Apple's restructuring will allow us to broaden it," he said.

Today, however, the CEO announced the company was reducing investments in various projects to integrate the Internet with the Mac desktop, including the OpenDoc component software technology and the Cyberdog application suite and interface.

Amelio's comments on content, as opposed to

 
Apple execs question Amelio leadership
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Financial health has a cost
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Productive moves for Apple
Apple rank and file paralyzed
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Apple faithful won't give up
go to story
software- and Internet-based technologies at Internet World, may reflect that there simply are better products in these veins that have already established themselves in the marketplace and with users.

Dataquest's Brown agreed. "Cyberdog? There's Netscape Navigator and Microsoft Internet Explorer out there," he said.

"Essentially, OpenDoc tried to do what Java will do. There was a need for it when it was first being developed, but it took too long to come to market. Java is obviously the programming language of the future," Brown added. "Anyway, this is positive stuff. Don't keep a project alive because some engineer is going to get upset."