The Restructuring of Apple Computer
By Andrew Pollack
Special to the New York Times
San Francisco -- May 31, 1985 -- Apple Computer Inc. took a giant step today in the painful transition from its entrepreneurial origins to the ranks of more conventionally managed multibillion-dollar companies.
In a move aimed both at streamlining Apple and moving it out of the shadow of its co-founder, Steven P. Jobs, the company announced a corporate restructuring that does away with its two separate product divisions, in favor of manufacturing and marketing divisions responsible for all Apple products.
The restructuring eliminates the day-to-day operating responsibilities of Mr. Jobs, who had been general manager of the Macintosh division. Mr. Jobs will remain only as chairman of the board, and will take what the company called a ''more global role'' in product development and strategy formulation.
Apple insiders and analysts saw the move as an urgent attempt by John Sculley, president and chief executive, to assert leadership at a time when the company is beset with numerous problems. There is a growing feeling on Wall Street and in Silicon Valley that Mr. Sculley, who was recruited two years ago from Pepsico Inc., must act soon to turn the company around.
'It's Serious Now'
''It's serious now; it's not the time for fun and games,'' said Michele Preston, an analyst with L.F. Rothschild, Unterberg, Towbin.
Apple is reeling both from the general slowdown in personal computer sales and problems within the company. Analysts now say it will barely break even in the quarter ending June 28, and might even lose money for the first time in its history. Because the summer quarter is traditionally slow, Apple's business is not expected to improve before Christmas.
The reorganization is just the latest step Apple has taken to try to reduce costs and improve its management. It has scaled back advertising, closed factories for a week, eliminated its Lisa computer and some development efforts, and laid off more than 1,600 people. Today's move is expected to produce more layoffs. #2 Product Units Eliminated The reorganization eliminates the two separate product divisions - one for the Macintosh and the other for the Apple II - and replaces them with an operations division and a sales and marketing division. As important as the structure, however, are the executives Mr. Sculley has chosen to head the new divisions.
Delbert W. Yocam, executive vice president, an operations-oriented manager who formerly headed the Apple II division, will become the group executive in charge of product manufacturing, development and distribution for all Apple products worldwide.
William V. Campbell, formerly executive vice president of sales, will head United States sales and marketing. Previously, marketing was split between the two product divisions and sales. Michael Spindler will remain vice president in charge of international marketing and sales.
Even before today's reorganization Mr. Sculley had been moving in a new team. He brought Jean-Louis Gassee, head of Apple's French operation, to replace Michael Murray, who, like Mr. Jobs, was young and enthusiastic but relatively inexperienced. In the new reorganization, Mr. Gassee will become head of product development, reporting to Mr. Yocam.
The movement of Mr. Jobs out of line operations partly reflects the urging of the new cadre of managers, and partly Mr. Jobs's own recognition that he was better at developing new products and preaching the Apple gospel than at the nuts and bolts of running a major corporation. Mr. Jobs, who is supposed to take some time off this summer in Europe, is trying to decide what to do next at the company, associates say.
Reports of Friction
There have long been reports of friction between Mr. Sculley and Mr. Jobs, which may in part have stemmed from an awkward division of responsibilities. Mr. Jobs, Apple's largest shareholder and the chairman of the board, was Mr. Sculley's boss in a sense, but, as Macintosh division head, was also Mr. Sculley's subordinate. On the other hand, one former executive said many at Apple were concerned that Mr. Sculley, a newcomer to the computer business, was not thinking independently from Mr. Jobs, and was getting too caught up in the old Apple culture.
A Logical Step
Analysts today praised the restructuring, saying it made little sense to have autonomous product divisions when both products were selling through the same retail channels to much of the same market. The revamping can eliminate certain duplication that formerly existed between the two product divisions, allowing the work force to be cut. ''It lowers the break-even point for the company,'' said Ulric Weil of Morgan Stanley & Company.
Eliminating the product divisions may also help alleviate morale problems that had developed at the Apple II group, which felt that top management was paying more attention to the newer Macintosh, despite the fact that the Apple II line contributes more than half of company revenues. Those morale problems contributed to several departures from the Apple II division, most notably that of Stephen Wozniak, the other founder of Apple.
But a reorganization cannot solve major problems still confronting Apple. One is that the entire computer industry seems to have gone into a downturn. Infocorp, a market research firm, reported that sales of computers in retail stores actually dropped more than 20 percent from March to April.
Apple had been expecting revenues of about $2.2 billion to $2.5 billion in the fiscal year ending September, up substantially from the $1.5 billion recorded last year. Now it is unlikely that Apple will do more than $1.9 billion. Apple had built up its overhead in anticipation of the larger volume, so that its margins are now being hurt.
Apple has also had some setbacks in its attempts to sell computers to corporations. The company's direct-sales efforts have had limited success - and have angered dealers, who account for most of Apple sales. Apple officials said the direct-sales effort would now be largely abandoned.
Apple's effort to find a strategic partner also seems to have faltered, or at least is taking longer than the company had expected.
Moreover, the Lisa computer was discontinued only a few months after being repositioned as the Macintosh XL. The Lotus Development Corporation's Jazz software product was two months late. And, Apple's file server, an electronic filing system that is a crucial link in its office system, was not available when the other office products were announced. It now does not look like it will be available until the end of the year.
Still, many analysts say Apple basically remains in a strong position, and should benefit from an upturn in the market.
''I think much of the problem is an industry-related problem,'' said Eugene Glazer, an analyst with Dean Witter Reynolds Inc.
Macintosh sales are doing fairly well, and the new laser printer is selling strongly. And while sales of the eight-year-old Apple II are down because of the downturn in the home computer market, the machine is still the leading home and educational computer by far.
GRAPHIC: Graphs of Apple stock prices and earnings; Drawing; Photo of Steven P. Jobs
Copyright 1985 The New York Times Company