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Apple's Decisions

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We've spent a lot of time and energy in recent TidBITS issues looking at the moves Gil Amelio and Apple management made to bring the company back to profitability. There's no question that some moves were more popular than others, but I think the time has come to delve into what might be going on, or at least what a significant number of people feel might be going on.

What Else Could Gil Have Done? Apple has taken flak for decisions to lay off employees, terminate some technologies, and place other projects in maintenance mode. I'm certainly guilty of harassing Apple about decisions I feel were mistakes, but let's face it: Gil had to do something. Apple lost a lot of money in 1996, and clearly that trend would continue in 1997 unless drastic action was taken. The recent announcements were that drastic action.

With no reason to assume sales would exceed all expectations, the only way Apple could regain profitability was to cut costs. Reportedly, a single engineer costs Apple about $150,000 per year in salary, benefits, support structure, office space, and so on. Not all of the 2,700 employees laid off were engineers, of course, and the 1,400 contractors and temps were undoubtedly cheaper, but even if you assume a savings of $100,000 per person, that's $410 million.

More important, unlike previous Apple layoffs, this one was combined with elimination of projects. That's depressing but realistic, since it means Apple isn't expecting to continue with business as usual, just with fewer people. You can't lay off 4,100 workers and expect to do everything you did while they were there.

That said, I would have liked to see Apple address its financial problems in other ways as well. First, where were the voluntary pay cuts and eliminations of bonuses for the executive staff? It seems hypocritical for executives to eliminate 4,100 employees not take pay cuts themselves. The buck stops at Gil Amelio, and I think it's only fair to have fewer bucks stop at his paycheck.

Second, were the Apple technologies cut of so little value that they couldn't be sold to raise money, such as with videoconferencing? Alternately, couldn't Apple have created technology incubators with these projects? Form a new company around each one, give the source code to the former Apple employees, provide some administrative support resources, and retain 40 percent ownership. If they succeed, Apple makes money and Mac users benefit; if they fail, Apple loses nothing more than what was already being thrown away.

The NeXT Takeover -- One theme among the mail I've received about Apple's recent changes is the perception that former NeXT employees are now making Apple's decisions. One person even commented that it felt like NeXT had bought Apple, not the other way around. To some extent, these perceptions are accurate - after all, Avie Tevanian and Jon Rubinstein, two ex-NeXT folks, are in charge of the operating system and hardware divisions.

In the past, Apple has been accused of a "Not Invented Here" syndrome (NIH), where the only technologies perceived to be worthwhile were those developed within Apple. Now, some feel the NIH syndrome has been reversed, with internal Apple technologies being viewed as inferior and over-engineered. The NeXT acquisition is the best example of this - there's some question if, had Apple really buckled down, bringing Copland to fruition would have cost $400 million and taken until 1998. Buying NeXT was a bold move, but it was neither cheap nor immediate relief from Apple's technology troubles.

The fact that concerns me most is that many of the comments about NeXT engineers making the important decisions come from Apple employees, Apple insiders (often former employees), and long-time Macintosh developers. Psychologically, I'm sure there's resentment about being bailed out by the acquisition of NeXT, a company whose technological achievements may be significant but didn't result in a profitable business. Similarly, from the NeXT point of view, becoming part of Apple gives former NeXT employees a chance to show off to a true mass market - so an interest in pushing their technology over Apple technology shouldn't be surprising.

In essence, the acquisition of NeXT is having a significant impact on Apple's culture. That's not necessarily bad, but it can make for an occasionally acrimonious transition. The question is whether the attitudes and beliefs that made the Macintosh special can survive in the new atmosphere.

Mac OS 95/Mac OS NT -- As I was talking with friends about the Rhapsody networking issues, I realized that the issue of the Mac OS and Rhapsody coexisting is worth additional thought. Consider the following:

  • At best, Rhapsody will be available for users in early 1998. So, developing for the Mac OS isn't a bad move for several years yet. The existing market isn't going away, and Mac OS machines will outnumber Rhapsody-capable machines for a long time.

  • Although it will reportedly be easy to program for Rhapsody (and some Unix applications can be ported without much trouble), Rhapsody's Yellow Box will have relatively few applications for some time. There's a distinct risk of Rhapsody being marginalized unless Mac OS applications running in the Blue Box or on Mac OS machines carry it along.

  • Rhapsody will have preemptive multitasking and protected memory for Yellow Box applications, which means that they could perform better and more reliably. In addition, things like the file system should have better performance, making the Yellow Box the obvious target for server applications and other situations where stability and performance are paramount. But, with the vast majority of the Mac market and the most applications, Mac OS machines will probably be the main clients for Rhapsody servers.

Now, doesn't the differentiation between the Mac OS and Rhapsody sound like the difference between Windows 95 and Windows NT? They look the same, and most applications work under both, but Windows NT has fewer native applications and is more trouble to set up and maintain. But, Windows 95 doesn't share NT's stability and performance. The main difference is that Windows 95 and Windows NT share the same programmer interfaces (APIs), so properly written applications run on both Windows 95 and NT. In contrast, Rhapsody's Yellow Box applications won't run on non-Rhapsody Macs, and existing Mac OS applications won't be able to take advantage of the preemptive multitasking and protected memory of the Yellow Box.

Comparisons to other Microsoft operating system switches may also be relevant. Even today, some PC games basically don't run in Windows, and users run them from DOS (which isn't possible with an NT-only machine). Similarly, some current Windows programs are still 16-bit and don't support such niceties as long filenames. In other words, switching from one operating system to another is seldom a clean process, and even Microsoft hasn't escaped its DOS and Windows 3.x legacy. In contrast, Apple has handled its operating system upgrades and even the move from the 680x0 to the PowerPC chip with aplomb. Will Apple maintain that level of consistency and excellent user experience in the future, with the move to Rhapsody?

For Sale or Breakup? Some of my more business-oriented friends have commented that Apple's recent moves might be gussying up the company for acquisition. Drop unprofitable products, eliminate technologies that haven't taken the world by storm, lay off 4,100 employees, and suddenly Apple becomes a more attractive acquisition target. We know Apple has had acquisition discussions with companies such as Sun Microsystems in the past; is it far-fetched to think Apple might consider such a move again? Rumors have already surfaced of a group of investors (led by Oracle CEO Larry Ellison) buying Apple.

Here's another, less-depressing thought: one of Apple's long-term problems is that it has always tried to do everything: hardware, operating systems, new technologies, application software, server software, and so on. Trying to do everything often causes conflicts, both internally and with third-party developers. Might it make sense to break Apple into three different companies, each of which could focus on its own goals more seriously?

One company would focus on operating systems and low-level technologies. As an independent company, it could focus on technologies that would advance the industry and earn licensing fees (can you say QuickTime?). That would probably mean more emphasis on cross-platform technologies and operating systems, and on shipping products in a reasonable time frame. It might also mean alliances with technology development projects in higher education, often the bellwether for the computer industry.

I see another company devoted to hardware, and since Apple has always made some of the best computer hardware, that company could make decisions that would let it be as successful as possible. If that meant making Intel-based hardware, so be it. Claris has made a lot of money selling Windows software, and the money is just as green on other platforms (in the U.S. anyway, where we have dull-looking money).

The third company would devote itself to application and utility software. Apple already has such a company in Claris, although I think Claris would do well to take over a number of additional products currently controlled by Apple. Even the Finder, which is just another application, could move to Claris, which could make different versions for different markets or platforms. I'd love to see the Finder instead of the standard Windows 95 interface.

Of course, this is mostly a thought exercise: I'm not in charge of anything at Apple, and I doubt Apple would do something so drastic. The question is, in such a situation, would there be an Apple Computer? If the answer is no, would that matter if the Macintosh survived and continued to thrive? When I commented in TidBITS-370 that customer loyalty to Apple was at an all-time low while users remained loyal to the Macintosh, email comments flooded in, agreeing 100 percent. It's an interesting phenomenon, and one that Apple and the Mac clone vendors would do well take into account.

Perhaps, in the end, Macintosh is an experience, not a machine.

 

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