Will success sour Apple?

Press, 13 September 1988, Page 28

Will success sour Apple?

By

GARETH POWELL

Apple worldwide is facing a major problem. It is called success. As the sales of the Macintosh computer surge to ever greater heights, as the profitability of the company sets an example to excite green envy in most of its competitors, so the problems increase. To put the figures in perspective, Apple had world-wide sales of a billion dollars in the quarter which ended June 30, which means that it is now effectively a four-billion-dollar-a-year company. And if the rate of growth continues, there is little doubt that it will end up. a ten or more billion-dollar-a-year company. The management structure, the management approach, the management ethos required for such a company is very different from that needed when Apple was apparently approaching the rocks less than four years ago. Plainly this is a worry to John Sculley, who heads the company. He has recently been on a short sabbatical to try to come up with a solution to problems that have not yet arisen.

One of the results of his cogitations is a reshuffle at Apple headquarters in Cupertino, California. Apple Computer has now split into four distinct operating divisions: ® Apple Products, which will be run by Jean Louis Gassee, the intensely charming, leather jacketed, diamond earringed ex-head of Apple in France. ® Apple Education and Apple Pacific, which will be run by Delbert Yocam,

who was chief operating officer of Apple in total. To outsiders this might seem like a demotion as the job of chief operating officer disappears but Del Yocam is quite genuinely pleased with his new appointment. Yocam said he was “extremely happy.” He said, “I did not want another year as COO. I was getting too far from the people of Apple.” © Apple Europe, which will be run by Michael Spindler. Not much of a change here. Merely formalising the current situation. © Apple U.S.A, will come under the leadership of Allan Loren. This is a surprise. Loren joined Apple only last year as head of its internal data processing functions. Loren, who previously worked at Cigna, the insurance company, is seen as a key to helping Apple sell machines to large corporations. One industry analyst said: “Loren represents where John Sculley thinks Apple ought to go in terms of the move into corporate America.” John Sculley said of this major reshuffle: “What it does is give us a scalable

organisation that can take us out to $lO billion in revenues in the early 19905.” This move is a reversal of what Sculley did to the company in 1985 when Steve Jobs, the man who founded the company with Steve Wozniak, left amid much acrimony and real tears before tea time. This is all recounted in Sculley’s book “Odyssey.” Then Sculley brought the whole decision-making nrnresc in Annie in the

final analysis into his own office. This was an emergency measure and by any standards it worked wonderfully well. But those crisis days are now past and centralisation becomes too unwieldly for a company with $4 billion in turnover. Hence the four new divisions.

It is not only in management that Apple has future problems. It is also running out of physical space at its headquarters in Cupertino. As a result, Apple is actively looking elsewhere and has apparently made a milliondollar deposit on 37 acres just outside San Jose. The price of $66 million appears to set a record for undeveloped land in California.

Apple declined to confirm these reports. It is also reported, somewhat confusingly, that Apple has put a semifreeze on all future hirings — they must now be approved by a vice-presi-dent instead of just a department head — and is at the same time looking to greatly expand its work force. The reports are that John Sculley came in from his sabbatical to attend a company

meeting and announced that 2200 more people would be hired at Apple during this financial year and a further 3000 in the following 12 months. No confirmation of this is available from Apple, and it may well be another furphy. It is also apparently not just on the Macintosh that Apple is building its future. The “San Jose Mercury News” has been recently running an advertisement seeking engineers for “Apple II: the Next Generation.” According to the advertisement, the engineers will be designing a new microprocessor for the Apple II push. That there will be changes in the Apple 11, especially the GS model, there seems little doubt. To underline the importance of the company gives to the Apple II line, the keynote speaker at Apple Fest will be John Sculley, who will be joined by Steve Wozniak, the man who designed the original Apple II and is still associated with Apple in a loose way. There is a rumour that Apple will launch one or two spin-off companies, as it did with its software product and Claris, to handle the Apple II line and the high-end Macs. This is vehemently denied by all Apple executives.

What does seem certain is that Apple will release a high-end Macintosh II workstation soon, running the Motorola 80630 chip, although it may not have a full implementation of all of that chip’s new and powerful features. This will be expensive. On the other hand, suggestions that Apple will launch a dirt-cheap Macintosh at basement bargain prices seem some way off the mark. Where these rumours probably started is at Mac Word Expo held last month. A panel of experts agreed that is would be a good idea, but that it was unlikely. Bill Campbell, who was a senior executive of Apple and now runs Claris, which is 80 per cent owned by Apple, is reported as saying that with the introduction of the Mac 11, Apple started heading towards more powerful machines “for fewer and fewer people.” He then went on to say, “Technology must be accessible and price is an important component of that.” Campbell added that to tap'the new wave of computer users, there had to be a “low-cost Mac that we all can use.” Campbell said that it was Apple’s “responsibility” to provide that machine.