Apple: After the Restructuring What Will We See?
March 1997
After our original article (Apple Resurrectus? March 1997) on Apple was completed, Apple announced a major restructuring. We felt that the opportunity to comment on it right away out-weighted the need to write a single, coherent article. We’ll continue to comment, of course, as events at Apple unroll.
Apple: after the restructuring what will we see?
Gil Amelio. Apple’s beleaguered CEO, had promised a restructuring announcement on March 14, in the fine tradition of yet another Apple Black Friday. Amelio’s remarks to the financial analysts and the press indicate that he looks on what has already happened, over the past year, as a hard effort to avoid restructuring and that the implementation of the March 14 announcements will put Apple on the path to a profitable future, starting sometime later this year.
While we hope he’s right, we join other industry commentators in wondering why it’s taken so longer to get down to business, while Apple’s assets – financial, intellectual, and human – continued to dwindle. Nevertheless, this is the bottom line:
- Apple hopes to cut $500 million in annual expenses and stabilize as an $8 billion computer hardware and software company, focusing on its traditional educational, consumer, and publishing markets.
- In order to do that it will have to simplify its product line, eliminating the Performa brand and replacing it with a low-cost PowerPC, aimed at the value-conscious segments of the consumer and education markets; it will also stop marketing its AIX servers (but continuing marketing servers based on the Mac/OS and, later, Rhapsody).
- It will also discontinue investing in further enhancements to its OpenDoc and CyberDog technologies, although it will continue to support them in their current form
- It will eliminate 2,700 Apple employees and 1,400 contractors from its 13,000 current workforce. Of the 2,700 employees, 55% of them will be U.S. based, and 80% will be in manufacturing, marketing, and R&D. We’d note that Apple – as have other high tech manufacturers – has a track record for laying off workers, but retaining their services through consulting and contracting arrangements or by outsourcing products and services to third parties. Asked about this, Amelio was firm that they would try to avoid such hidden activities.
Left unsaid was quite a lot we expect to hear more about:
- Will Apple really hold on to its Newton and Claris divisions, or are they planning to sell them off? Claris is profitable, so it would be easier to sell, but is likely a real contributor to the Apple bottom line. Newton has cost Apple plenty in money, in focus, and in reputation, but it’s about to turn its corner; the PDA market is starting to heat up and the new E-Mate 300, based on Newton technology, looks like a real winner (if Apple can build enough, and if they can build a business version, as well as the initial education
version, quickly).
- Will the developers stick? Amelio and Guerrino DeLucca keep talking about how the new Mac/OS strategy has given the developers a much better platform, but we’re not sure they’ll see it that way. Mac loyalists are likely to stick with Mac/OS and be reluctant to move to NeXT. The capped Mac/OS strategy doesn’t fix the Mac/OS underlying problems in memory management and elsewhere. And no one knows yet why the combination of Macintosh hardware and NeXT software will be so much more compelling to developers (or the market) than NeXT has been so far, which can lead to developer hesitancy.
- Moreover, will developers who have decamped from the Macintosh platform or never paid it much attention now flock to it? Unlikely. They have plenty to do and are likely to wait for a strong positive trend to show itself.
Amelio and his "world class" crew (his term, repeated often, in his answer to a question about who his current direct reports are) need to send some quick signals to the market, to both customers and developers, reinforcing the announcements they made on March 14, and moving to sharply focus on markets where Apple and Macintosh have leverage. Any departure from this strategy will immediately be viewed as proof that Apple will not be able to work itself back to profitability this year – and that’s the real signal we all need to see.
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Entire contents © 1997 by Amy D. Wohl. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden.