Apple Chairman Has Prescription for Future of Ailing Company

SAN JOSE — After 100 days on the job, Apple Computer Inc. Chairman and Chief Executive Gilbert Amelio on Monday offered up his prescription for the ailing computer maker and announced that International Business Machines Corp. and Apple will work together on a notebook computer that will run Apple’s Macintosh operating system software.

Amelio said his plan to turn around Apple calls for slashing away at overhead while creating innovative products, particularly for the Internet.

Meanwhile, Amelio said IBM and Apple will sell the notebook computer under their own brand names sometime before the end of this year. The long-hoped-for deal--the announcement of which came as a surprise--represents the first time IBM has cloned another company’s technology. Amelio presented his anxiously awaited turnaround plan at the company’s worldwide developers conference being held here this week and expected to attract about 4,000 software makers.

A two-pronged strategy like the one Amelio is proposing is a balancing act that few companies have been able to pull off. Perhaps in a nod to the difficult days ahead, Cupertino, Calif.-based Apple premiered its “Mission Impossible” commercial, starring actor Tom Cruise.

Even so, the new chief expressed confidence that Apple--less than three months ago believed to be in straits so dire it would have to be sold--will become profitable within a year and over time regain its standing as one of the most innovative companies in American business.

“Apple is the company that made complex technology simple. It is the company that changed the world,” he said. “Last year this company was No. 1 in software patents. . . . We’ve still got more fire in the belly.”

Despite the magnitude of Amelio’s task and even though software developers have become cynical by Apple’s inability to keep past promises, the plan received a largely favorable greeting.

“Rock and roll,” crowed Tom Beardmore, “technical guru” for APS Technology, a Kansas City, Mo.-based software developer. “The whole idea that they’re going to take the Macintosh operating system [software] and make it a transport vehicle to the Internet is light-years ahead of anything anyone else is talking about.”

Investors seemed less impressed: Apple shares fell 18.75 cents to close at $27.06 on Nasdaq.

Amelio vowed that in the struggle toward profitability--the company has posted about $1 billion in losses during the last two quarters-- he will not sacrifice technology innovation.

“I will really resist any effort to cut back on research and development,” he said. Some cost reductions will come over the next year as Apple eliminates half its computer line, which had ballooned to 37 models last Christmas. A streamlined product catalog will enable Apple to better predict customer demand for its machines and thus avoid the inventory glut that has forced massive write downs.

Although Amelio insisted Apple will not drop out of any markets--saying, “I need all the sales I can get”--it is clear that he will focus most of Apple’s resources on markets where its easy-to-use Macintosh has a loyal following, like schools, publishing and multimedia.

Amelio hopes to add Internet content developers to that list. Copland, the new version of the Macintosh operating system expected to be released later this year, has been delayed until mid-1997, in part, to add Internet features.

In the meantime, Apple will make parts of Copland, like Internet content authoring tool Cyberdog, available to developers.

And Amelio hopes the Macintosh will become the computer of choice for those surfing the Internet. A U.S. version of Pippin, a television set-top computer for accessing the Internet and now only available in Japan, will be introduced May 15.

Apple also will include an Internet browser on all Macintoshes by the end of the year, Amelio said.

“Apple will be a totally different company a year from now,” Amelio promised in an interview with The Times. “I think what I’ve outlined today is quite different than what’s been said before. Now you obviously need to implement these things.”

“What Apple needs to do is execute, and that’s not sexy,” said Bud Colligan, chief executive of Macromedia, a San Francisco software developer. “That’s always been the problem for Apple.”