Friday, April 18, 1997

Apple seeks to reassure customers, software developers

By CATALINA ORTIZ AP Business Writer

SAN JOSE, Calif. (AP) - Its losses ebbing but still huge, Apple Computer Inc. needs to convince customers it's on the comeback path.

The troubled personal computer pioneer sought to do just that on Thursday, a day after it reported a $708 million quarterly loss. Apple placed full-page ads in major newspapers in which chairman Gil Amelio expressed confidence in the company's recovery.

Amelio, in a television interview, also vigorously countered persistent speculation that Apple could be sold or taken over.

"(Apple) is not looking for a buyer. We have no buyers waiting in the wings. We have no discussions going on with anyone about buying Apple," he told CNBC.

Amelio was hopeful despite the staggering loss for the January-March quarter, its second-worst quarterly performance. Most of it was due to special charges for a thorough reorganization and its purchase of Next Software. Revenues and shipments of Macintosh computers were down sharply.

But the Cupertino, Calif.-based company stressed progress it has made in rebuilding itself and recent introduction of computers already proving popular.

"For these reasons, I am now more optimistic than ever," Amelio said in the newspaper ad, in the form of a letter to Apple customers.

Industry analysts said there was some cause for optimism about Apple. The company, helped by Macintosh users' pent-up demand for new machines, could meet its goal of making money again by fall, they said.

But they stressed that Apple - even if it carries out its reorganization and new strategies without a flaw - still faces a tough challenge for the long term: reassuring customers and software developers.

"Until people feel confident that Apple and the Macintosh are going to be around a year from now, they're going to have trouble," said Kevin Hause, an analyst with International Data Corp. in Mountain View, Calif.

The company's latest loss also heightened speculation that Oracle Corp. chairman Larry Ellison might succeed if he tries to take control of Apple. Ellison has been trying to line up investors for a possible bid.

Rob Enderle, an analyst at Giga Information Group in Santa Clara, Calif., said the report puts even more pressure on Amelio and other top managers - and could make shareholders more open to new ownership and management.

"It's fueling Larry's effort to take them over," he said.

Apple, the nation's fourth-largest maker of personal computers, has lost sales and market share in recent years to industry-dominating PCs using Intel Corp. chips and Microsoft Corp. software. And because it develops and makes both hardware and software, Apple has been burdened by higher costs than its competitors.

Its latest loss was the fifth in six quarters and swelled the amount of red ink over the past 18 months to more than $1.6 billion. The company's reorganization simplifies its corporate structure and product line to concentrate on the key home, publishing and education markets. Apple also is laying off 4,100 employees, 30 percent of its work force.

But new products - hardware and software - are key to rebuilding customer and software developer confidence in the company, analysts said.

"They've got to bring out products customers really want at prices they can afford. (Amelio's) starting to move in that direction," said Tim Bajarin, president of Creative Strategies Research International in San Jose.

Earlier this month, Apple began selling Power Macintosh machines running at speeds of 225 and 250 megahertz. They followed the introduction of new PowerBook notebook computers running at 240 MHz.

Apple also still must work hard to keep its biggest business customers loyal. Analyst Enderle believes that will be difficult because Apple is not stressing low-maintenance PCs and simpler management of networks like Microsoft and Oracle are doing.