Despite troubles, Apple Computer will survive


LAST WEEK'S resignation of Apple Computer Inc.'s chief financial officer in a rift with the chief executive highlights widespread uncertainty about the company's future. The two reportedly had clashed over whether the pioneering computer company should put itself up for sale. Apple's plight stems from a combination of factors: It can't meet demand for its Power Macintosh computers, its modest market share is eroding to a dangerous low, and the company has warned that for its fourth-quarter, which ended Sept. 30, profit will be "significantly below" expectations. What is Apple's outlook? Can it make it on its own? If so, will it increasingly become a niche player? Did its recent moves to lower its prices and license its technology come too late? Is a sale or merger its only hope?

John Gantz

Senior vice president, International Data Corp.

I don't think a sale or merger is its only hope. I think its short-term financial outlook is probably tied more to the production problems than to its rapidly eroding market share. Our forecasts for Apple have it maintaining market share, so that over the next five years it's around 9 percent of the total PC market.

To me the issues are, if Apple pulls back from its licensing efforts -- in fact, if it doesn't beef them up -- and if Apple cannot get its new operating system out within 12 months, then the company is in serious trouble. But for now there is demand for its products; they just can't make them fast enough.

I'm very skeptical about any mergers in the computer industry. I can't picture a business partner who would be so simpatico with Apple that there were be a net gain.

John Robb

Computer strategy analyst, Forrester Research, Cambridge, Mass.

Apple is in a very difficult position right now. Its market is saturated in the States and it may be becoming a Microsoft-Intel kind of world anyway. It needs about 20 percent market share to survive and it only has about 10 percent now. So things are pretty grim there. The stock analysts didn't like the firing (of CFO Joseph Graziano) a bit.

But there's plenty of options for their future. They may position themselves as a company for sale. They have lots of very good engineers and smarts about what people like in computers.

One of the most interesting options for Apple may be to focus on what's called redefining the computer paradigm. There's a lot of buzz in the PC industry right now about what the next generation of computers will be. They could be a player in that area. But they've got to move on it soon. A lot of other companies are also looking at that. It's a long term play, but it could be the ultimate salvation for the company.

Jerry Michalski

Managing editor, Release 1.0, New York-based technology newsletter

Apple has lost a lot of its technology leadership. Novell, Lotus and Apple are all being squeezed in a big way by the Internet and Microsoft. It would do Apple quite a bit of good to form some type of merger or alliance with a company that has a better strategy for the future, particularly with communications.

But the worst thing in the world for them would be to be gobbled up, digested and then barfed back up as a misconceived entity the way NCR was. One thing I've noticed is that the Macs still are a lot easier to plug in, install and operate than Windows. But Apple has underestimated the demand and isn't meeting it. That's just one of the dumb things they've done. They should concentrate on stimulating the market and meeting demand.

Rich Malloy

Editor, Mobile Office magazine

These are very important things to consider. You also might mention the fact that the Power Books [laptops] had that problem with the batteries, they burst into flames, and they had to recall all of them and put new nickel metal hydride batteries in them. Then you have Windows 95, which is much more competitive version of Windows relative to the Macintosh.

But all of that said, I've been watching Apple for a long, long time and there have always been takeover rumors where they would be bought by any number of other companies, including AT&T;, and nothing has ever happened there.

I think Apple still has a real strong niche in the market. For example, in the graphics area, they have a very, very strong entrenchment there. And in the education market. In sales markets -- they are used by a lot of sales people. And it would take a lot of changes for them to be pushed out of those areas.

They have some challenges to be sure. But I think it is a little premature to just count them out.

Looking at the history of [computer company] mergers in the past few years, if it was something like NCR in the case of AT&T;, it would not be good news for the company. I can't think of a successful merger in the past few years. So I think a merger would not be positive for the company.

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