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Apple Computer '97: What's In, What's Out

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By now you've all heard about Apple's cold turkey diet regime for cutting costs in an effort to return to profitability in 1997. Let's take a quick look at what was cut, what's on life support, and what survived. If you want to see the official word, check out these press releases, then come back for some analysis.

<http://product.info.apple.com/pr/press.releases /1997/ q2/970314.pr.rel.restructure.html>
<http://product.info.apple.com/pr/press.releases /1997/ q2/970314.pr.rel.faq.html>

2,700 Employees -- Apple announced plans to lay off 2,700 full-time employees out of a total of about 11,000. Also being terminated are 1,400 of 2,400 contractors and temporary employees. Many of those employees worked on technologies that are being cut, although Apple's Advanced Technology Group (ATG) was reportedly hard hit. About 55 percent of the layoffs are in the U.S., with the rest coming from international groups. Interestingly, in response to a question during the analysts' conference call on Friday, Apple executives said none of the layoffs were hitting Apple Japan.

There's nothing good about laying off employees, other than the cold-blooded bottom line numbers, but I suspect these Apple employees will have relatively little trouble finding new jobs. I hear Microsoft's popular MS Bay Macintosh development group (the folks responsible for Internet Explorer for the Mac) are hiring like crazy.

ATG -- Speaking of ATG, a good deal of Apple's basic research has been eliminated, which could prove problematic a few years down the road. Apple executives said that 90 percent of future R&D would be devoted to education, publishing, and human interface design. They claimed that they were aiming to make the ATG budget five percent of sales, down from about six percent last year. That doesn't sound bad, but when you think about how sales have dropped, the cuts equal about a third of the ATG budget. The Apple executives noted that Compaq and other major PC vendors typically spend only one to two percent of sales on R&D.

Performa -- In my opinion, the smartest cut Apple made was of the Performa brand name (although existing Performas will remain in the channel until sold out, when they'll be replaced by Power Macs). I've never liked the Performa branding; when it first appeared, I commented back in TidBITS-142: "The name, which appeared soon after Compaq's Prolinea line, doesn't impress me, and I worry about the recycling of technology into a new product line... It shows that the Performa line is primarily a marketing move." I thought then that users would be confused by the name, since it wasn't inherently clear that a Performa even was a Macintosh, and the rapid proliferation of model numbers made it impossible for even those of us who watch the Mac closely to track each model. On Friday, Apple finally admitted that confusing consumers who want Macs is a bad thing.

Videoconferencing -- Apple has dropped its videoconferencing products and technologies in favor of solutions from other companies. Overall, this strikes me as a good move - videoconferencing hasn't been a killer application because of the bandwidth needed, and other companies have more experience and more interest in the field. Apple can't do everything, and videoconferencing must be completely cross-platform to succeed in a commercial way. Let someone else do it.

AIX and the Network Servers -- Apple's recently-introduced, high-end Network Servers run AIX, a version of Unix from IBM. Although the Network Servers have been well-received by the high-end publishing crowd, Apple has decided to pull AIX from future servers, which will instead run either the Mac OS or Rhapsody, the code name for the first version of the Mac OS based on NeXT technologies. Apple will support existing customers, and I suspect those machines will continue to work just fine. This doesn't feel like a bad decision either - Apple can't waste effort supporting too many operating systems.

Biannual System Updates -- A while back, Apple promised major retail Mac OS updates every six months, with minor bug fixes every three months or so. It was a bold announcement, and I hope whoever made it enjoyed the taste of the words. After Tempo, now called Mac OS 8, which will debut in July, biannual System updates are a thing of the past. Apple executives admitted that the programmers simply couldn't get software out the door that fast. The schedule now calls for the "premier" release of Rhapsody to appear at the end of 1997, and Apple will try for a yearly release schedule of major updates, with minor bug fixes coming every six months. I think this is all just posturing. Scheduling in the computer industry is known to be fantasy: there's nothing wrong with Apple announcing schedules and trying to stick to them, but anyone who believes that Apple (or anyone else) can do so consistently is dreaming.

Maintenance Mode -- The items mentioned above are now history. However, a number of other technologies have been placed in "maintenance mode." It's still not quite clear what that means, although I suspect that bug fixes will be made and updates to support new hardware may happen, but there won't be much more. Apple's press release claims: "Most of the elements of Mac OS today are maintained in this sense today - yet customers and developers use them daily. Apple continues to improve the reliability and performance of the overall system including technologies that have not seen major updates in years. Furthermore, these technologies will reside in Rhapsody as part of the Mac OS layer (the 'Blue Box') that will run today's software for years to come on a faster, more reliable foundation." Keep that in mind when I talk about the following items.

Open Transport -- On the face of it, I think putting Open Transport in maintenance mode and switching to a Unix-derived Berkeley Standard Distribution (BSD) networking scheme on top of the Mach kernel is an idiotic move. Apple went through serious pain to transition AppleTalk and the aging MacTCP to Open Transport, and after an initial bad version (forced by the release of the Power Mac 9500) Open Transport has proved a solid, flexible performer that meets the many and varied needs of Macintosh users.

Questions surrounding this move abound for Rhapsody. For instance, how will Apple support AppleTalk in a BSD-based networking implementation? What about plug & play networking? What about security (you don't see many $10,000 security challenges being hosted on Unix BSD-based systems)? And what about features already demonstrated for the now-cancelled Open Transport 1.5, including IPv6 and multi-homing? I'll be writing more about this issue soon, because if interface is the heart of the Mac, networking is the soul.

OpenDoc -- Apple seems to believe that OpenDoc and Java fill similar roles in the world of component software technologies. Although I'm not sufficiently technical to verify that (any programmers want to write an article about it?), the feeling was that it was wasteful to put effort into OpenDoc when so many developers consider Java to be the feline's sleepwear, and OpenStep already offers a powerful model for component software development. OpenDoc will continue to be supported in the Blue Box, but I can't see any reason why independent developers should continue OpenDoc development. Overall, I think it's a shame, given that OpenDoc was just starting to turn the corner, as noted back in TidBITS-365. Apple put a lot of effort into developing OpenDoc and evangelizing developers; if I were one of those developers, I'd be utterly disillusioned right now.

Cyberdog -- Speaking of disillusionment, I imagine Joe Kissell and David McKee, authors of a cool book called Cyberdog: Live Objects on the Internet, must be feeling pretty low. Cyberdog was OpenDoc's killer application (if that term can apply to a document-centric technology), and Apple has put it in the same maintenance mode as OpenDoc. Cyberdog 2.0, which is currently in beta, and OpenDoc will ship with Mac OS 8 in July, so they'll still be available for people to use, but it's hard to recommend that people use Cyberdog in favor of competing technologies that have a future. I imagine the version of Netscape Navigator once promised for Cyberdog can be forgotten too.

Game Sprockets -- Game Sprockets was a set of libraries and tools designed to make it easy to program games for the Macintosh. Like OpenDoc and Cyberdog, it will continue to live on in its existing form in the Blue Box. Ironically, that will mean that games written using Game Sprockets will only run in the Blue Box, just as there are PC games today that only run in DOS, not Windows. Although I don't have any opinion about Game Sprockets in particular, I think the game market is an important one for a computer that's aimed at the individual consumer, and Apple had better do something to ensure that game developers want to continue developing for the Mac.

Mac OS Development Tools -- Apple has created numerous tools for programming the Mac OS over the years, and although those tools will remain available, Apple is concentrating instead on development tools for Rhapsody. Although a tremendous amount of code for current Macintosh applications was written using Apple tools like MPW and MacApp, programmers were already aware they'd have to use new tools to develop for Rhapsody, and many already rely on tools from independent developers such as Metrowerks and Symantec.

Alive and Well -- All this doom and gloom shouldn't give you the impression that Apple is closing up shop to become, as one joke press release suggested, a non-profit corporation. Apple still makes a lot of money (they're estimating about $8 billion for 1997), and Amelio and company have given some products and technologies a respite, presumably for the cash flow they bring in.

Newton -- I'm sure a collective sigh of relief went up from Newton owners and developers when Apple announced that the Newton division would emerge unscathed. The Newton MessagePad 2000 and eMate 300 are now shipping and have been well received, so they survive... for now. Apple's press release notes: "Apple is exploring a wide range of options for future Newton business. We have no specifics regarding those discussions at this time." To my mind, this means one of three things, and I have to admit that I don't much care which so long as the Newton technology survives and moves forward. Take your pick of:

  • Apple continues to work on the Newton internally.
  • Apple spins the Newton division off into its own company.
  • Apple sells the Newton division to some other company.

Claris -- I don't believe that Claris was ever in much jeopardy, and the wholly owned subsidiary will continue earning money for Apple. Claris reported record revenues of $67 million for the first quarter of fiscal year 1997, and revenues of $236.2 million in 1996. Demand for Claris's products has remained strong on both the Mac and Windows, with FileMaker Pro 3.0 for Windows becoming the second best-selling database in the PC desktop database market. The Mac version has long been the best-selling Macintosh database.

Mac OS Licences -- Rumors have been flying that Apple hopes to increase revenues by charging the Mac OS licensees more for the right to make Mac clones. As explained during Friday's conference call, nothing has changed in this situation. The fees will change at some point soon, but that's because currently Mac OS licensees also license Apple's hardware designs, the so-called "Tanzania" motherboard. Once it's possible to make CHRP (Common Hardware Reference Platform) machines, clone makers won't have to license the Tanzania motherboard, and Apple has always planned at that point to adjust the license fees to account for the new situation.

Loyal Customers? I'd like to close by noting that in the analysts' conference Apple's executives went on a bit about how the company's greatest asset is its loyal customers. In the past that's certainly been true, and it may still be true now that the company has lost so much money, laid off so many employees, and discontinued so many technologies. However, from talking to numerous users and developers, it seems to me that although loyalty to the Macintosh and all it embodies may remain, loyalty to Apple as a company is hitting an all-time low. There's a big difference, and I'm not sure it's one that Apple's management realizes. One of the executives commented that Apple would reward loyal customers by continuing to build great products. I would question if that's likely in the near future or, more important, it it's sufficient to reward the years of loyalty so many people have shown in the face of continual derision and obstacles.

 

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