New chief executive at ailing firm plans a second bite at Apple

 

GIL Amelio means business. After 100 days at the helm of Apple Computer, the struggling personal computer industry pioneer, he is imposing some old fashioned discipline in a company renowned for its counterculture.

Deliberately flouting Apple's vaunted casual dress code which created the "business casual" fashion the chief executive comes to work in a conventional suit and tie. It is a signal to Apple's employees, he says, that it is time to "get serious about running our business".

The changes, however, go far beyond trading T shirts and jeans for pinstripes. This week, Mr Amelio announced a reorganisation of Apple's operations into divisions that will each be responsible for their own financial performance.

"A year from now, Apple is going to be a very different company . . . noticeably different," he says.

His most important priority is to return Apple to profitability.

Last month, the company reported losses of $740 million for the quarter to March 29th, including a $388 million write off of excess stock and a series of restructuring charges. Sales, at $2.2 billion, were down 18 per cent from the same period last year.

As he tries to knock the company back into shape, Mr Amelio spares few punches. "Apple is at a crossroads," he says. "One road leads to prosperity . . . [the other] a slow decline into irrelevancy."

The outcome will depend on "how well this organisation can set aside individual agendas and, united, rediscover the elements of greatness that led us to the forefront of this industry".

But for the present it seems that Apple's Irish operations and its 1,200 Irish workers will not be affected by the restructuring. Apple's Irish managing director, Mr Padraig Allen, has said that he does not expect any major restructuring of the Irish operations and that the 1,200 jobs mainly in Cork will be maintained.

By eliminating multiple products with differing circuit board designs and components, Apple will reduce total costs by 15 per cent, he says.

The decision may help improve profit margins, but nonetheless it is controversial. In the past, the company has offered a wide range of Macintosh models aimed at particular segments of the PC market such as education the range will now have to be much smaller.

Another of Mr Amelio's edicts has been to stop Apple software developers working on projects that compete with those of independent companies developing Macintosh software. This is designed to boost third party development of new programmes for the Macintosh, which is critical to Apple's success.

Mr Amelio also seemed to have achieved a breakthrough when he announced last Monday that Apple and International Business Machines were jointly developing a notebook computer which both companies intend to market.

Even as Mr Amelio tries to bolster Apple's core Macintosh business, he is pursuing a new vision.

In the short term, this will mean incorporating programmes in Macintosh software that allow users to access the Internet. Looking beyond the present Internet frenzy, however, Mr Amelio believes the next "mega trend" will be "digital appliances".

He envisages a range of gadgets for the kitchen or living room, such as smart telephones, pocket computing devices and games machines. He has created a new product division and redeployed some of Apple's research and development efforts to build prototypes.

Apple missed its opportunity to establish Macintosh technology as a standard for desktop computing 10 years ago, industrial consultant Mr Tim Bajarin says. But he believes there is an opportunity for it to seize a lead in the emerging market for digital appliances.

The challenge for Mr Amelio, however, is to reinvigorate Apple's core business at the same time as he pursues new opportunities. This proved to be the downfall of one of his predecessors, Mr John Sculley, who was Apple's chairman and chief executive from 1983 to 1993.

With Apple's Macintosh business now in decline, Mr Amelio cannot afford to wait too long for his visions to materialise. But he remains confident he can restore the company's fortunes.

"People have been speculating on whether Apple will survive," he says. "But a year or so from now, they will look back at this period in Apple's history and ask what the fuss was all about."

In the meantime, however, Apple has some difficult times ahead. It will be another six months or so before Macintosh sales begin to pick up, Mr Amelio predicts, and probably longer before his plans for "digital appliances" materialise. "I wish we could be invisible for nine to 10 months but we don't have that luxury," he says.