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Apple peels away costs

Apple Computer's comeback plan is taking shape, and cutting costs is a priority.

An important part of Apple Computer's comeback plan is taking shape: cutting what are deemed to be unnecessary costs.

In a deal worth $200 million, the company's latest move is the sale of its data center in the Napa Valley to a subsidiary of MCI.

The 175 employees in the center will now be managed by SHL Systemhouse but will continue to provide data processing, systems and network maintenance, and help-desk services to Apple under a seven-year contract with the company.

The deal is Apple's second move to outsource noncritical operations in recent months. In April, the company sold a manufacturing plant in Colorado to SCI Systems of Alabama. The plant, which employs 1,000 people, still produces Macintosh computers.

Ellen Hancock, Apple's vice president of research, told Wall Street Journal Tuesday that she is under orders to reduce spending but declined to give specific targets.

The most striking instance, however, is Apple's newly delivered reality check to the company's research and development team, long considered the heart of the company. Apple, which by some accounts spends two or three times what other major manufacturers spend on R&D, now says it will reduce spending by freezing staff levels and possibly charging customers for some software technologies that it currently gives away.

The organization has long prided itself on its ability to create new technologies and Hancock emphasized that the reduction in spending won't reduce the level of innovation at Apple. By shifting product lines to the Common Hardware Reference Platform (CHRP)?-a hardware platform designed to be able to run multiple operating systems with equal efficiency--she says the company will save money on developing hardware by using off-the-shelf components instead of having to hand-build parts.

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