Wednesday, September 24, 1997

Apple reportedly will make network computers

By CATALINA ORTIZ / AP Business Writer

SAN JOSE, Calif. (AP) -- Apple Computer Inc., fending off stiff competition for computer customers in schools, reportedly will make machines that are simpler and cheaper than standard PCs.

Steve Jobs, Apple's co-founder and interim leader, has approved the design and manufacture of so-called "network computers" running Macintosh software, the San Francisco Chronicle reported Tuesday.

Apple's NCs will be unveiled at the MacWorld Expo trade show in January and be available in the spring, the newspaper reported. MacWeek magazine reported Apple's plans late last week. Both publications cited unidentified sources.

An key target for the new machines would be schools, an area in which Apple -- despite loss of overall market share -- remains strong.

"There's reason to believe it will be successful with the education market," said James Staten, an analyst with Dataquest Inc.

Network computers, in addition to being cheaper than ordinary personal computers, are easier and less expensive to manage. Another plus is that instructors control the network to which NCs are linked, making sure pupils don't have access to programs they shouldn't.

"Teachers (now) spend half their time preventing kids from messing up the system and the other half repairing the damage the kids cause anyway," said Henry Norr, a veteran Apple watcher who is a MacWeek columnist.

Apple spokeswoman Katie Cotton said the company has not announced any plans to develop NCs but is continuing to explore the possibility of doing so.

The company's NC will cost between $700 and $800, the Chronicle and MacWeek reported. Standard personal computers generally cost at least twice as much. Schools, however, also would need a server computer to manage the network.

The move, while expected, marks the latest major change at the company since it ousted chief executive officer Gil Amelio in July.

Since then, the company under Jobs' leadership has announced a broad alliance with Microsoft Corp., backed away from letting other companies clone the Mac and reversed an earlier decision to spin off the unit making the Newton hand-held computer.

The company, however, has failed to give Macintosh users or software developers a definite direction of where it is headed, analysts and Apple watchers said.

"It's not very clear to me how they're going to use these particular pieces ... to create a strategy that's going to hold on to their core markets," Norr said.

Still, observers said, network computers could be a valuable part of Apple's future.

Advocates of the simplified computers, primarily Oracle Corp., say they will displace many standard PCs in the home and in business. Apple is one of several companies allied with Oracle and its NC standard.

Unlike traditional PCs, network computers lack a hard drive for storing such application software as spreadsheets or word-processing programs. NCs instead take those programs as needed from the network.

While not as powerful or feature-laden as traditional PCs, network computers will let users surf the Internet, exchange electronic mail and perform basic computing tasks.

Apple NCs will use a PowerPC microprocesor code-named Arthur, people familiar with the project told the Chronicle and MacWeek. They likely will run the current Mac operating system and be connected to servers running Rhapsody, Apple's future-generation OS.

In addition to trying to attract the education market, Apple plans to target some businesses, notably publishers, another area in which it remains strong.

Apple already has experience selling a simplified computer to the education market. Its eMate, a portable machine similar to a small laptop computer, has proved a hit in schools.

But Apple and other allies of Oracle aren't alone in trying to expand computing with simpler machines. Intel Corp. and Microsoft Corp., whose chips and software run most personal computers, are promoting a different machine that is less bare-bones than NCs.

Compaq Computer Corp. on Monday became the first manufacturer to unveil a line of those machines, known as Net PCs. But other PC makers, including IBM, have backed away from or slowed plans to make the simplified computers, questioning the market for such machines.

Industry observers said Apple, while potentially gaining from NCs, can't afford to drop the ball on its traditional desktop machines. That's especially important in the wake of its unpopular recent decision not to license future technology to clone makers.

Dataquest analyst Staten and colleague Martin Reynolds said in a new report that Apple's reversal on cloning could "lead to its demise as a serious player in the PC market."

Ending cloning, Staten said, takes pressure off Apple to come up with exciting new products and makes customers uneasy about relying on a single source for computers.