With deep surgery on its board of directors and an injection of cash from its long-time nemesis Microsoft, Apple Computer is hoping to make a return to financial health.

After accumulating losses of $1.5 billion over the past 18 months and seeing its share of the world personal computer market steadily decline, Apple is in a "precarious state at best", say market analysts.

Yet Mr Steve Jobs, the charismatic cofounder of Apple, who has joined the company's board, is determined to give "his" company a new lease on life. He has tens of millions of Apple Macintosh fans rooting for him.

In the past, Microsoft and Apple have had a rocky relationship. The companies fought a long and bitter court battle over Apple's allegations that Microsoft copied the "look and feel" of the Macintosh to create its Windows personal computer software.

Apple lost that battle both in the courts and in the marketplace. Veteran Apple analysts and former executives hold Microsoft responsible for the company's decline. In a reminder of this bitterness, the crowd attending Macworld in Boston on Wednesday booed Mr Bill Gates, Microsoft chairman and chief executive, when his face appeared on a video screen.

Mr Greg Maffei, Microsoft chief financial officer, yesterday acknowledged that his company and Apple had had "some ups and downs". He noted, however, that Microsoft was the largest producer of application software for the Macintosh.

For Microsoft, the Macintosh market is a relatively small portion of its business, yet an important one. Apple no longer represents a significant threat to Windows, which runs on more than 80 per cent of the world's PCs.

Macintosh software represents an estimated 10 to 15 per cent of Microsoft's revenue, a portion big enough to make a dent in the software leader's performance. Microsoft would continue to develop office application software for the Macintosh, Mr Gates said.

"Microsoft has millions of customers who rely on Macintosh technology and they can be assured that Microsoft products for the Mac will continue to be available."

As part of the agreement with Apple, Microsoft's Internet Explorer internet browser software will be installed on all future Apple products. Although this does not prevent users from choosing the competing Netscape Communications browser, it is expected to give Microsoft a boost in its ongoing battle for internet software market share.

Apple's survival is also important for Microsoft as a defence against allegations of anti-competitive business practices. Microsoft can at least point to Apple as a viable competitor in the PC operating system market.

In an attempt to avoid antitrust questions, Microsoft will be a "non-voting" stockholder. But the deal could fuel antitrust complaints from Netscape to the Justice Department.

For Apple, however, Microsoft's endorsement is perhaps the strongest vote of confidence that it could hope to get. Mr Jobs said he had come to recognise that for Apple to win it did not mean that Microsoft had to lose.

Reconstituting the Apple board, which has been widely criticised for its lack of intervention over the past few years, was another important move. The new board would take a "hands on" approach, Mr Jobs said.

As a member of the board, Mr Jobs returns to an official role at Apple, 12 years after he was summarily booted from the company. Returning Apple to its glory days may not be possible, but Mr Jobs's efforts appear at least to have given it a chance to survive.