Apple reorganizes itself as a Next clone
By Ed Scannell and Tom Quinlan
Posted at 5:15 PM PT, March 14, 1997
Spread the news: Apple Computer has not acquired Next. Next, for all intents
and purposes, has acquired Apple.
As Apple formally unveiled its widely expected survival strategy Friday, it
leaned heavily on the products and strategies developed at Next when it was a
separate company. Apple agreed to buy Next in late December, bringing Apple
co-founder Steve Jobs back into the Macintosh fold.
And while the Macintosh and the MacOS remain Apple's primary products, many
Apple-developed technologies -- considered core just a month ago -- are now,
with Friday's ax fallen, all but gone:
* QuickDraw GX; and
* Apple's videoconferencing technology.
OpenDoc and Cyberdog will no longer be upgraded and will ship in MacOS 8
only, the number of future MacOS upgrades has been reduced, and Apple will
stop upgrading its development tools for the MacOS. In addition, the future of
CI Labs is uncertain.
Also gone from Apple are 2,700 full-time and approximately 1,400 contract
employees. The company is cutting costs in an effort to end a string of dismal
financial quarters. As a result of the workforce reduction, a $155 million
restructuring charge will be reported in the company's second fiscal quarter.
Rhapsody and Java are now in the driver's seat in Cupertino. Apple will focus
on developing Rhapsody, its NextStep-based OS, with even more emphasis on
Java -- including a Java API set being developed by Next for NextStep and
"We are investigating how best to combine the text and graphics features of
GX with Display Postscript to build the imaging model in Rhapsody," company
With regard to the MacOS, Apple altered the delivery schedule for releases
beyond MacOS 8. Instead of two full retail releases of MacOS in 1998, Apple
will ship one complete release in mid-1998, code-named Allegro, and a full
release yearly from then on. Customers will get the latest system improvements
through two updates that will come between MacOS 8 and Allegro.
Although Apple won't drop out of any of the markets it is currently in, the
company will significantly cut the number of consumer models it offers, with
the Performa name going away first, company executives said. Apple will
announce a new line of entry-level computers in April while phasing out the
Apple also indicated that although it would continue to market the MessagePad
line, it is considering either selling the Newton division, or fully
licensing the technology to third parties. The Newton Systems group remains
intact while executives "explore" the other options.
More important in the long term, however, is the direction that Apple intends
to take with its technology, which now has a decidedly Next bent.
Although the company did not address its plans for Windows NT, in the future
Apple executives expect the Microsoft operating system to play a larger role
in the company's future plans.
Such moves reflect not only the considerable influence wielded by Jobs,
dubbed a part-time consultant, but also Apple's dismal track record in the
1990s of punctually delivering promised products.
Most of Apple's major initiatives over the past seven years -- including the
five-point alliance with IBM, Taligent, the Copland and Gershwin OSes, clone
licensing, and Newton -- have either been scrapped before products hit the
market or have fallen far short of expectations.
That may explain why the red ink continues to flow at Apple. The company is
expected to post a loss of between $800 million and $1 billion for its current
quarter, which ends this month. That will include write-offs for costs
associated with the layoffs, Apple's $400 million acquisition of Next, and an
estimated $100 million operating loss.
Apple, which in fiscal 1995 was just shy of $12 billion in total revenues,
wants to get its break-even point to occur at less than $8 billion in annual
turnover. The company said it expects to return to profitability in the fall.
Friday's moves are designed to give Apple a solid business model, said
chairman and CEO Gil Amelio, by streamlining the company's bureaucracy, more
tightly integrating Apple's marketing efforts, and focusing research and
development on Apple's core markets.
Analysts were not about to declare the patient well, however, after Amelio's
latest round of surgery.
"All the things they talked about in terms of cost-cutting are needed, but
there is no magic bullet here," said Gene Glazier, an analyst with Dean Witter
Reynolds, in New York. "The most important thing they must do is turn the
sales force around."
"I'm having trouble seeing how material this will be to them in the long
run," said Rob Enderle, senior analyst at Giga Information Group, in Santa
Clara, Calif. "The software side seems to be coming together, but the hardware
is still messed up. OpenDoc was never going anywhere anyway, but they're
still going to have to support it forever."
"On the software side, it is a Next strategy. This was the plan all along: To
get rid of MacOS and use Rhapsody as a transition product [to Next]," Enderle
said. "The transition should take about four years. Eventually I expect them
to end up on Intel."
Apple Computer Inc., in Cupertino, Calif., can be reached at (408) 996-1010
Dan Briody, contributing reporter, and Elinor Mills of the IDG News Service,
an InfoWorld affiliate, contributed to this report.