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Amelio takes to the pulpit

Macworld Expo In a much-anticipated speech on his company's future, CEO Gilbert Amelio says Apple Computer will base its next-generation operating system on the Next Software kernel.

--Apple Computer (AAPL) is headed for a major "discontinuity," CEO Gilbert Amelio said today, but don't get nervous.

In a much-anticipated speech on his troubled company's future, Amelio tried to reassure Macintosh users that their investment will be safe as he outlined a major shift of its operating system to technology developed with newly acquired Next Software.

Amelio's theme was that all this is good news for Apple because industry progress is created by "discontinuities." To that end, he said, "we're going to create our own discontinuity."

Last year's marketing theme at Apple was based on the movie Mission Impossible, but today's was Independence Day--a story line that had the underdogs battle monsters from outerspace but beat all odds to save the world. To make the analogy crystal clear, Independence Day star Jeff Goldblum introduced Amelio today, proclaiming that he was helping strike "a blow for humanity."

Amelio harkened back to earlier technological upheavals experienced by the company, pointing specifically to the transition from Motorola 68000 processors to Power PC chips a few years ago. "It can be done, and we're going to do it again," Amelio vowed.

It was unclear whether his many reassurances worked. Apple's stock remained fairly stable, ending the day down 3/8 of a point at 17-1/2 an hour after Amelio's address. (See related story)

Amelio said the hybrid, newly dubbed Rhapsody, will be based on the NextStep operating system.

NextStep will give Apple memory protection, which keeps the entire system from crashing when one application goes down, and preemptive multitasking, which speeds performance by dividing processor time between applications more equally. But Apple will retain much of its most popular standalone technologies, including its QuickTime Media Layer, OpenDoc, the Meta Content Format, and its TCP/IP connections for hooking up to the Internet.

Adopting the technology helped explain Apple's reasons behind its $400 million purchase of Next. The hastily arranged announcement of the merger last month was notably short on the details that mattered most to the developers whose livelihoods depend on a viable Macintosh industry.

Today, Amelio attempted to fill in those blanks, reassuring customers and developers that the transition to the new OS will be both smooth and quick.

Rhapsody will be released to developers in mid- to late 1997 and to the first wave of customers by next February. But that release won't run any existing Macintosh applications, so Apple doesn't expect users to migrate en masse until mid-1998.

That's when Apple will ship what it calls the "unified release," a version of Rhapsody that will run any Mac software in a separate window at about the speed of current PowerPC systems. Apple stressed that it will encourage all of its customers to move to Rhapsody but will continue to upgrade the System 7.0 OS for several years.

Because of the dearth of specific technology plans at the time of the Next merger announcement, much attention was focused instead on the return of Next CEO Steve Jobs, this time as a special adviser reporting directly to Amelio.

Jobs got the biggest applause again today, when he took to the stage at Macworld Expo to demonstrate what Apple got when it purchased his company.

Steve Jobs is the center of media attention as he takes the stage

While Jobs is now again an Apple insider, he adopted the tone of the objective outsider, acknowledging that Windows has pulled ahead of the Mac in terms of basic architectural features such as multitasking.

"Our mission is to provide relevant, compelling solutions that customers can only get from Apple. If we can't figure out how to do that, there are a lot of other options for people to buy computers from," he said.

Jobs also was able to indulge in a little boasting about NextStep, which a month ago seemed to destined for the scrap pile of good products that never really made it.

"We have to bring out an operating system that's even more advanced than NT. This is not easy to do because these operating systems are very complex. We forget it's taken NT eight years to get where it is today. Fortunately, we've got one that has been battle-tested for five years," Jobs said, referring to NextStep.

But despite Jobs's bravado and Amelio's repeated reassurances, today's speech was at least partly overshadowed by Friday's announcement that the company expects to post a loss of $100 million to $150 million for its first quarter.

Amelio, who came to Apple a year ago from National Semiconductor in an effort to turn around the company's fortunes, spent several minutes at the beginning of the noontime speech discussing the surprisingly high predictions of quarterly losses announced last week. He tried to reassure users and investors that the anticipated loss is just a blip, attributing it entirely to a slump in Performa sales.

"The problem was that Santa Claus forgot to come," Amelio said. "Q1 is about retail sales, not the fundamental position of Apple," he said, reassuring users that Apple would "stay the course" compared with the "strategy du jour of the past."

"We're pointed very definitely to a comeback," he declared. "I don't want this to shake your confidence; it's not going to shake ours."

Not everyone was completely sold on Amelio's blueprint, however. "I'd give them an A for technology and a D on message," Dataquest analyst Chris Le Tocq. "I was looking for more on the user interface, how the new operating system is positioned as a server or a Web server. They need to say what you cannot do on NextStep."

However, he believes that Apple may be able to deliver the new Next-based operating system sooner than promised in 1998. The question, according to some, is how the company will fare between now and then.

"The technology direction is solid. They're going to be backward compatible. It's the base they need to build to move forward," Tim Bajarin, president of Creative Strategies International. "The question is can they survive the 12 to 18 months it'll take to get to that point."

Photos by: Donald R. Winslow