ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, January 18, 1996 TAG: 9601180064
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: SAN JOSE, CALIF.
SOURCE: Associated Press
APPLE COMPUTER INC., losing money and market share, is trying to reinvent itself by focusing on ``best-of-class'' computers in key markets.
Losing money and market share, Apple Computer Inc. decided Wednesday to become a different company, eliminating 1,300 jobs and abandoning some sales opportunities to other firms.
Apple said it will concentrate on ``best-of-class'' computers in its key markets, including desktop publishing and education. Such machines are more profitable than those in the entry-level consumer market, which Apple now plans to leave to companies that clone its Macintosh computer.
The changes are an ``initial phase'' of a reorganization Apple announced with its financial results for the last three months of 1995.
The company, as it had warned, lost $69 million, or 56 cents a share, in its first fiscal quarter. It earned $188 million, or $1.55 a share, in the same period in 1994.
Apple also forecast a loss for the second fiscal quarter and said that loss would be worsened by a $125 million charge to pay for the restructuring.
Sales in the latest quarter rose 11 percent, to $3.1 billion from $2.8 billion. And unit shipments grew 12 percent to 1.3 million.
Such volume is the highest ever for Cupertino, Calif.-based Apple. But it was below internal targets and sharply behind the overall industry's growth, which means the company lost market share.
The company's gross profit margins fell to 15.1 percent of sales during the quarter, down from 20.7 in the previous quarter and 28.7 a year ago.
``The task in which Apple management and its board of directors is currently engaged is to utilize Apple's strengths in order to position the company for long-term strength and success,'' said Michael Spindler, Apple's president and chief executive officer.
``The most immediate and obvious work we must undertake is to quickly streamline operations. The work-force reduction is a necessary first step.''
Apple's troubles have sparked speculation about whether Spindler would keep his job. But the company's announcement did not mention any change in his status.
The 1,300 layoffs, about 8 percent of Apple's work force, will take place over the next year. Most will be in sales, marketing and administration, Spindler said.
Industry analysts had speculated that Apple could lay off up to 3,500 of its 14,000 employees. It was not immediately known if further reorganization would mean more job cuts.
``[Apple] can no longer be all things to all people. And it must emerge as a company that focuses on products that they do well,'' said Tim Bajarin, president of Creative Strategies Research International.
Apple is going through one of its worst times since Steve Jobs and Steve Wozniak started it in a garage 20 years ago. Industry observers have said that Apple - hurt by management blunders and changes in the personal computer industry - must change if it is to survive.
Apple's troubles are complex. Industry observers blame its longtime reluctance to let other companies make the Macintosh, high development costs and changes in the personal computer industry.
In recent years, Apple has been increasingly hurt by competition with companies such as Compaq and Packard Bell, whose computers are built around Intel Corp. chips and Microsoft Corp. software. Those machines have become easier to use, eroding the Apple Macintosh's traditional edge.
Apple's market share fell from 9.4 percent in 1993 to 7.4 in the second quarter of last year, according to market researcher Dataquest Inc. of San Jose. Apple, which cut prices to gain market share, bounced back in last year's third quarter to 9 percent, but the most recent sales figures indicate another decline.
Apple's expenses are greater than competitors' because it develops its own chips and operating software. And Apple seriously misjudged demand last year, when consumers bought the best machines they could afford and disdained less-costly ones. That left the company with a huge backlog of orders for high-end, profit-rich Macs and a glut of low-end machines on which it makes little money.
Industry observers widely think Apple's most serious mistake was not letting other companies make copies of the Mac until late 1994, missing its chance to set an industry standard. Apple has hoped that allowing clones would expand the Macintosh platform - and shoulder some of the costs - but so far, it has reached licensing agreement with only a few small companies.
But Apple said Wednesday it would ``pursue a much broader licensing'' of its Macintosh operating software, allowing more companies to clone the Mac.
LENGTH: Medium: 88 lines ILLUSTRATION: PHOTO: AP. Apple's headquarters will be the scene of changes inby CNBmonths to come. color.