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Mood is tense at Apple

THE BALTIMORE SUN

CUPERTINO, Calif. -- The mood is tense these days at Apple Computer Inc. In a little more than a month, Microsoft Corp. will launch Windows 95, the software modeled after Apple's Macintosh operating system, thus taking a giant step toward wiping out the ease-of-use advantage that has long made Apple famous.

Microsoft intends to pump $135 million into promoting Windows 95 in the fall, and pundits are predicting it will be an overnight success, with as many as 35 million copies selling in the first six months.

Doomsayers predict this could mean nothing less than the end of Apple. But with a new rallying cry -- "Windows 95 is Mac 89" -- Apple is launching a series of initiatives aimed at turning Microsoft's hype on its head. With a new line of systems, a more combative advertising campaign, tantalizing hints of new software to come -- and, perhaps most important, a more focused business strategy -- Apple believes it can more than weather the storm.

"We don't think [Windows 95] offers anything the computer industry hasn't seen yet," says Apple Chief Executive Michael Spindler. "It will be a significant consumer product this Christmas because neophytes will rush to anything new. We counter this by saying, 'This is what the Mac does, and does better.' We're well ahead in changing the interaction between the human and the machine."

Mr. Spindler insists -- and many analysts agree -- that the Mac platform currently has momentum. The company's PowerPC machines, based on a new kind of microprocessor, have sold well since they were introduced last year. Last week, the company introduced a new line of PowerPCs that are more affordable for home users.

Apple also sought to steal some of the spotlight trained on Microsoft with a preview of Copland, the long-awaited next-generation version of the Macintosh operating system. Designed to take full advantage of the PowerPC technology, Copland will feature a far more sophisticated method of performing multiple tasks at once as well "intelligent agent" technology, which enables the software to perform tasks such as sorting electronic mail automatically.

Together with the appointment of Donald Norman, a highly regarded University of California, San Diego, professor and author of the book, "The Design of Everyday Things," to head of Advanced Technology, the Copland project signals Apple's intention to reclaim its position as the leader in smoothing the interactions of man and machine.

Without sacrificing technology leadership, Mr. Spindler has sought to inject a sense of pragmatism into Apple, in contrast to the grandiose and often misguided vision of his predecessor, John Sculley. He has repositioned the company to take advantage of its traditional strengths in market niches such as desktop publishing, multimedia production and education. Together, these niches, now multimillion businesses, will grow between 10 percent and 20 percent yearly.

No longer will Apple wage costly -- and largely unsuccessful -- campaigns to win over corporate PC buyers.

"Apple is never going to appeal to people who just want to run a spreadsheet," said Mark Hall, editor of MacWeek, an industry trade publication. "If that's all you want to do, you're much better off with a cheap Windows machine. I think it's a good thing that they've decided to stop investing in lost causes."

David Coursey, editor of PCLetter, puts it more succinctly: "They woke up and are smelling the coffee."

Some say that none of this will be enough. Windows 95, it appears, will be just about as sleek as the Macintosh when it's launched on Aug. 24, and Copland will not be ready until sometime next summer at best.

Last year, Apple's market share fell to less than 8.3 percent of the worldwide market for personal computers, a historic low for the company, according to San Jose market researcher Dataquest Inc.

"There isn't any great software that makes you want to gloat, 'I have a Macintosh and you don't,' " Mr. Coursey said. "Instead, 'It's the Windows guys who say, 'We get all the new stuff and you don't.' "

Mr. Spindler had hoped that licensing the Mac operating system, long considered heresy at the company, would boost market share and thus keep the allegiance of software developers. But so far, Apple has signed only a few small licensees, including start-up Power Computing and Radius Inc., a maker of peripheral products for desktop publishers.

Stan Shih, chairman of Acer, a Taiwan computer maker, said Apple wants too much control over licensees. Mr. Shih said he would make Macs if there were no restrictions on how and where Acer could market the machines, terms that Apple -- concerned that clones would cannibalize its own hardware sales -- was unwilling to agree to.

There seems to be little interest among big PC makers such as Compaq Computer, Packard Bell and Gateway to make Macintosh clones. "It was really too late," says John Warnock, chairman of software maker Adobe. "If they had done it two years ago, they might have had a chance." In those two years, Microsoft has firmly established Windows as the industry standard.

But Mr. Warnock and others are optimistic that Apple can prosper as a more specialized supplier. Mr. Spindler has mobilized task forces to serve the segments where it has traditionally been strong.

"It used to be that after the sale of the machine, Apple didn't do much to contribute toward the care and feeding of the customer," Mr. Warnock said. "I've seen them become much more proactive in working with us."

Despite having largely given up on the mainstream corporate market, Apple remains determined to battle it out in the home against low-cost producers such as Packard Bell and Gateway. To do so, it will have to operate more efficiently while sustaining R&D; costs higher than its competitors.

"We are in a market-share strategy, but not at any price," Mr. Spindler says. "Market share at any price is suicidal. We have to make money to reinvest in the business."

To boost volume, Apple is again looking at interactive TV. It has licensed its software for set-top boxes that would allow televisions to run CD-ROMs. Those kinds of deals will do little to raise revenues but should offer further incentive to software developers to stick with Apple.

The wild card in Apple's future may be IBM. Their 1989 alliance has so far produced the PowerPC and two software companies that have produced little of substance. Apple boosters are hoping that IBM takes a step closer to Apple and begins making Macintosh clones for sale to its loyal corporate customers.

And Apple hopes that consumers over the long run will notice that Apple technology remains at least a little bit better. "If you run it on a Macintosh," Mr. Spindler said, referring to the much-publicized problems with Disney's "Lion King" CD-ROM, "no buts or ifs about it, the lion will show up."

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