Apple peels back to the core

29th March 1996 at 00:00
It's not all gloom and doom for schools computer supplier Apple. Jon Swartz reports from Silicon Valley in the US

Is Apple in a transitional state or simply a state of chaos? Industry observers insist the besieged company is a stable - even thriving - enterprise. Apple's recent slide has touched off a wave of bad press and troubled the most ardent Mac watchers: its trumpeted on-line service, eWorld, will go belly-up on March 31; Apple lost US$69 million during the Christmas season and expects a bigger loss in the first three months of 1996; market share was eroded to 7.8 per cent last year from 8.4 per cent in 1994; and boss Michael Spindler was replaced by Gil Amelio.

Apple's withering has some computer shoppers, including many in education, questioning whether it's wise to buy a Mac. But before anyone writes off the company, experts say Apple has several factors in its favour - most notably its technology. In fact, Apple could be on the threshold of making a comeback in the second half of the year. "Apple is a US$12 billion company with a loyal customer base of 22 million users," says Mark Hall, editor-in-chief of MacWEEK, a trade magazine based in San Francisco. "Apple is selling at record volumes. The Mac will remain price competitive. And its operating system has a reputation that is better than Windows 95."

Apple shipped a whopping 1.3 million units and raked in a record US$3. 15 billion in sales for the quarter ending December 29, 1995. What's more, the company recently licensed the Mac operating system to Motorola, and is ready to recruit one of the top PC makers by the end of the year, according to new boss, Gil Amelio. (Apple UK in February announced a deal with Acorn Computer Group to create a separate company that will supply Acorns, Macs and PCs for school - see right.) Ken Krich, president and chief executive officer of ComputerWare, a string of Apple-only dealers in the United States, says Mac sales over the last three months are up 40 per cent from a year ago: "Despite all the bad news, Apple is selling more than ever. It's still extremely strong in the education and consumer markets."

That base of support should become broader, Mark Hall and others say, when the PowerPC Platform (PPCP) becomes available this summer. The platform, or computer family, will allow vendors to build Mac-compatible computers based on a variety of PC-standard components instead of having to use Apple's proprietary technology, says Apple Vice President, C Lamar Potts. Licensing agreements will result in more lower-priced Macs being built and sold, boosting the company's flagging market share, predicts Ken Krich.

Meanwhile, Apple is patching up its relations with vendors. In January it named Heidi Roizen, former boss of a Mac software developer, as vice president of Apple developer services. "We need to do more with companies like Microsoft and Adobe," she says. "Dealing with developers should be an integral part of what Apple does."

She'll have to. The company's relations with software vendors, considered critical to the Mac's long-term success, is battered, according to analysts.

"Ten years ago, Apple had something so special that people were willing to team up with them and ignore the downside of doing business," says Amy Wohl, editor of Pennsylvania-based TrendsLetter magazine. "That's not the case any more with Windows now here. Apple has to grow up, or get the hell out of the business." That's the responsibility of Gil Amelio, who turned round the fortunes of National Semiconductor and Rockwell International. He was plucked from Apple's board of directors in February to engineer a financial comeback.

Amelio, who has pledged to conduct a "house cleaning" at Apple, is seen as the right man for the job. In addition to pulling the plug on eWorld, he is assessing the company's overall operations before he starts trimming away at the corporate fat. "Amelio is a hard-nosed businessman with no impediment to Apple's myth and legend," Amy Wohl says. "He's exactly what they need."

Jon Swartz is a reporter with the San Francisco Chronicle

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