Apple Seeks to Repeat Go-Go Success of '80s
Declining profits in recent years have forced the computer company to lower prices and refocus on software and service
SAN FRANCISCO — NEXT month marks the 10th anniversary of the Macintosh computer and may also symbolize the beginning of a new era for its manufacturer, Apple Computer.
New top executives at Apple predict the company will recover from recent years of declining profits. Analysts say the company has the potential to repeat its go-go technological successes of the early 1980s, but the computer maker faces challenges. Apple's liberal labor policies may be among the victims.
Mark Hall, editor in chief of the industry trade publication MacWEEK, predicts Apple's executives will develop new technology and improve profits. ``But they will keep a sharp eye on fixed costs and keep down overhead,'' he says, possibly leading to more layoffs and exporting of jobs from Silicon Valley.
Back in 1977 Apple founders Steve Jobs and Steve Wozniak made a low-cost, high-quality personal computer that virtually created the home and small business market. Before then only large- and medium-sized businesses could afford the expensive mainframes and personal computers manufactured by companies such as IBM and Wang.
Setting up manufacturing and research facilities in Silicon Valley, the liberal-minded company executives provided a collegial atmosphere and unconventional benefits, including a free personal computer for every employee.
``It was a cushy place for young, educated people to work,'' says Lenny Siegel, director of Pacific Studies Center in Palo Alto, Calif., a public interest watchdog group. Assembly line workers never got the same benefits as white collar employees, ``but they were paid above industry standards,'' he adds. Technology innovator
Apple also maintained its reputation as a technology innovator well into the 1980s.
In January 1984 Apple introduced the Macintosh with a now-famous Super Bowl Sunday advertisement symbolically portraying a futuristic Apple smashing big brother IBM.
The Mac quickly developed a loyal core of enthusiasts, particularly in the fields of graphic design, education, and desktop publishing. Apple was the first to introduce color monitors, high-quality graphics, and sound cards - devices that allow computers to play back music and sound effects.
In 1983 Mr. Wozniak and Mr. Jobs brought in John Sculley, former president at Pepsi-Cola, to reorganize Apple. Within two years both founders had left in what many analysts saw as Apple's final transition from entrepreneurial capitalism to corporate heavy hitter.
``The Sculley era was enormously successful'' from a business standpoint, MacWEEK's Mr. Hall says. ``He built Apple into an $8 billion operation.''
But Apple refused to license its innovative technology to other companies and also kept prices well above those of the competition.
Microsoft Corporation then introduced the Windows operating system, which adapted many of the Mac's most appealing features. Apple's market share dropped from 12.1 percent in 1989 to 9.5 percent in 1990, according to analysts at InfoCorp.
``We asked people to pay a little too much money'' for the Mac, admits Ian Diery, Apple's general manager for the personal computer division.
By 1991 Apple began a plan to lower prices, cut costs, and regain market share. The company laid off thousands of workers and accelerated the transfer of other jobs outside the company.
Janitors at Apple's headquarters went on strike to demand union recognition and protest the contracting out of their jobs. After a boycott of Apple products and much negative publicity, Apple and the independent contractor agreed to recognize the union and significantly raise pay.
Apple, like other Silicon Valley companies, now hires programmers and other professionals on a temporary basis.
``Apple has been at the vanguard of America's new way of doing business,'' Mr. Siegel says, ``making profits by not providing stable jobs.''
Mr. Diery defends Apple's labor policies, pointing out that the company still has some of the industry's best wages and benefits, including innovative policies not available at other corporations.
Feeling the pinch of declining profits earlier this year, president and CEO Sculley left Apple to be replaced by company veterans Michael Spindler and A.C. (Mike) Markkula.
Both executives now place their hopes for Apple's success on the new PowerPC line of Macs, reportedly due out next March. These new Macs will process information faster and provide greater capabilities for graphics and multimedia.
``By 1995 we'll see about 3 million PowerPC Macs sold,'' predicts Martin Reynolds, director of technology assessment at InfoCorp. That should help improve Apple's market share, he says, which has already come back up to 11.4 percent so far this year. Shifting focus
Apple may help profits by selling computer software and on-line services. These, Diery predicts, will make up ``more than 20 percent'' of the company's profits in the near future.
But the cheapest Mac still costs several hundred dollars more than an equivalent IBM clone. Apple is not trying to compete at that end of the market, Diery says. Many Macs now come loaded with sophisticated hardware such as CD-ROM drives capable of accessing an entire encyclopedia, for example. When those extras are factored in, Diery says, Mac prices are competitive.
Diery says Apple's new executives are carefully watching the bottom line. In the past ``Apple was often just considered a research university'' producing products ``that people loved,'' he says. ``Now we've got to make sure they make money as well.''