COMPUTERS

An acid test for Apple

PAUL BERTON,JOHN BARBER April 15 1985
COMPUTERS

An acid test for Apple

PAUL BERTON,JOHN BARBER April 15 1985

An acid test for Apple

COMPUTERS

Hobbyists were the first customers for personal computers, which were essentially novelties rather than accepted business tools. But in August, 1981, Armonk, N.Y.-based International Business Machines Corp. (IBM) introduced the IBM PC. Since then IBM has sold almost two million of its revolutionary machines, 78 per cent of them to corporate customers. As well, almost all microcomputer programs now are designed to be compatible with the IBM PC and its imitators. Although desk-top computers have become almost as common in offices as pencils,

IBM’s complete dominance of the market has left most of its competitors with only two alternatives: producing socalled “PC clones” or leaving the computer business. Only one major company has refused to obey the rules of the market. Cupertino, Calif.based Apple Computer Inc. is staking its survival on its ability to beat back the overpowering IBM tide.

The phenomenal early growth of Apple under cofounder Steven Jobs,

22 when he started the firm in 1977, has transformed the company into an international corporate legend. But the reputation masks the fact that Apple products have consistently failed to penetrate the lucrative business market. Indeed, the company still derives much of its revenue from the schools and individuals that continue to buy its Apple n, whose design is eight years old. That computer acquired a new edge in the market last month when IBM cancelled its unpopular PC Jr., but the Apple lí faces threats from new low-priced competition expected soon from such manufacturers as Commodore, Atari and, indeed, IBM. Now, analysts agree that Apple’s survival as a major computer manufacturer lies in its ability to break IBM’s virtual monopoly in business microcomputers.

When Apple introduced its Macintosh

in January, 1984, industry experts said it was one of the most innovative and easily operated computers ever designed. Its unique operating system, which cannot use programs designed for the IBM PC, signalled a bold challenge to the industry giant. But, although Apple has sold almost 300,000 Macintoshes worldwide, fewer than half of them have gone into offices, according to Dallasbased Future Computing Inc., a market

research firm. And the Macintosh still does not present serious competition to the IBM PC and its clones. Last year Apple launched a $100-million international advertising campaign to turn that situation around, backed up with price cuts and a new, more powerful version of the Macintosh. And this January the company unveiled the latest weapon in its arsenal: an innovative system that the company is calling “The Macintosh Office.”

It is still not clear whether the improvements will ensure Apple’s survival as a major computer manufacturer. Said Mark Stirling, an industry analyst

and president of Toronto-based International Data Corp. (Canada) Ltd.: “At this point the coin is still up in the air, but they have certainly got a good chance to be a major player.” For his part, Andrew Toller, director of market analysis for Toronto-based Evans Research Corp., declared, “We expect to see a sort of Coke-Pepsi situation develop in office computers.”

The most innovative aspect of the new

Macintosh Office is the recently introduced AppleTalk network, which links as many as 31 Macintoshes with a single printer. Its cost of $80 a connection makes it a genuine breakthrough. By contrast, IBM’s PC Network costs $1,200 to $1,400 a connection. And although the PC Network also allows connected computers to communicate with each other and make use of a common memory, Apple plans to introduce similar technology later this year which some analysts predict will permit communication among both Macintoshes and PCs. In keeping with the “user friendly” philosophy that characterized the Macintosh’s

original design, Apple claims that the network is every bit as simple to hook up as a string of Christmas lights. The key to AppleTalk is the company’s new LaserWriter printer. The size of a desk-top photocopier, it can reproduce several styles and sizes of type as well as complicated graphics. Apple is aiming the system at the corporate communications, marketing and advertising departments of many companies, which could use it to eliminate many printing and typesetting costs. Although laser printers are not new, Apple’s is unique in its ability to exploit the exceptional graphic and typographic capabilities of the Macintosh. Said Toller: “A lot of companies that previously spent a lot of money on printing will go with the LaserWriter.” Even without all the components in

place, The Macintosh Office has already created considerable enthusiasm among businesses. Seattle, Wash.-based Seafirst Bank, for one, recently bought 1,000 Macintoshes, the first step in an ambitious plan to equip all of its branches, 3,500 office workers with desk-top computers. At Peat Marwick in Toronto, an international accounting firm, partner Dennis Hogarth has ordered 400 of the machines for use in the auditing departments of its 23 Canadian offices. Internationally, the company has installed 5,000 Macintoshes in offices also served by IBM and other computers. And still another specialized user, the Toronto

Globe and Mail, will be testing Macintoshes in its classified advertising section and is considering the computer for its newsroom as well. Said William Holtzman, spokesman for Markham, Ont.-based Apple Canada Inc: “This is the kind of niche we need. It means we will finally be able to solidify our role in the office.”

Still, The Macintosh Office has not yet been tested in everyday use. And many observers say that Apple oversimplified the system and underestimated the true costs of installing it. Said Stirling: “A lot of people are skeptical. It will be great if it really is that inexpensive, but nobody has yet made it work. That will have to be done before the system is fully accepted.” Indeed, vital components have yet to be introduced, and the

computer industry as a whole has a reputation for failing to deliver new products. Added Stirling: “It will be critical for Apple to deliver on its promises.”

One of the most vital of those deliveries—and one that is delayed for reasons outside of Apple’s control—is the introduction of an integrated business program currently being designed for the Macintosh by Cambridge, Mass.-based Lotus Development Corp. Called Jazz, the program will eventually combine five essential functions in a single package similar to the Lotus 1-2-3 software which proved extremely popular with

users of IBM PCs and PC imitators. Combining word processing, database management, spreadsheets, business graphics and external communications functions, Jazz is a key element in Apple’s strategy. Originally, Apple expected that Jazz would be available in 1984, but Lotus has delayed its introduction until May at the earliest.

Lack of software is not the only problem besetting the Macintosh. Indeed, the computer first came onto the market with serious limitations for business use. Despite substantial memory and a microprocessor that theoretically worked twice as fast as the IBM PC’s, the original Macintosh was hampered by a lack of storage capacity. Apple addressed the problem last August with the introduction of the so-called Fat Mac, with four times more memory, and it is currently offering a conversion service to owners of the original machine for $1,000. Meanwhile, the company has repackaged its failed Lisa business computer as the Macintosh XL, with a larger screen, memory and storage capacity than the two existing Macs.

Despite its technical difficulties, most analysts agree that Apple excels in marketing its products. The company’s worldwide marketing campaign includes frequent full-page newspaper advertisements that encourage potential customers to take a Macintosh “test drive,” billboards, glossy takeout sections in magazines, including Maclean’s, and last November the $3million purchase of every £ available page of adverI tising in a special issue of Newsweek.

Apple’s campaign has at least entrenched its computer’s name in the minds of many North Americans. Said Lawrence Wolf, president of Toronto’s Goodis-Wolf Inc. advertising agency: “Apple and IBM are the only two computer companies that have established a clear brand personality. All the others seem to be talking to themselves.” But as officials of the renegade company from California’s Silicon Valley know well, that accomplishment is just a first step. To battle successfully with IBM in the corporate corridors of North America, Apple will have to put a lot of bite into its talk.

PAUL BERTON

JOHN BARBER