Apple Fighting To Stay Ahead

Market Place

By Robert Metz
The New York Times

July 8, 1982

Apple Computer, which is to personal computers what the Model T Ford was to automobiles, has not managed to cash in on its success. It's true that the company's shares, introduced at 22 in December 1980, rocketed to 34 1/2 within weeks. But they have been more or less in a decline ever since. In yesterday's over-the-counter trading, the shares ended at 11 1/2 bid, the lowest level so far.

At their peak price, the shares were trading at a price/earnings ratio of 100 - a level that put the stock in the fad category. With a multiple that high, according to a familiar Wall Street adage, the shares discounted not only the future but the hereafter as well.

Apple Computer Inc. quickly delivered on its promise. Earnings jumped to 70 cents a share in the fiscal year ended last Sept. 30, up from 24 cents a share a year earlier. That's almost a triple increase. With $1.05 a share anticipated for the year ending next Sept. 30, earnings will be up this time by about 50 percent.

This gain would be extraordinary under normal circumstances. Nevertheless, such a reduction in the percentage gain from the prior year has brought a widely held perception that Apple's growth is slowing. In the present bear market, that is unforgiveable. At yesterday's close, the stock carries a modest P/E multiple of 11.

Some of the biggest names in electronics have entered the personal computer market. At recent computer shows, as many as 100 competitors have shown new products. Among the older names to enter the field with eye-catching equipment are Zenith, Xerox and - every computer company's bugbear - International Business Machines.

Apple is widely regarded as possessing superior software and a superior design that has been the model for many competitive product lines. The company's future nevertheless has been downgraded by Wall Street.

Even so, Apple has not rested. The company has under way a program intended to maintain its leadership position in personal computers. First, Apple is introducing an upgraded version of its industry leading Apple II, the largest-selling personal computer. The new version is believed to incorporate many refinements, although the company steadfastly refuses to confirm conjecture about the product or to indicate if it will be introduced, as many expect, in time for the Christmas selling season. Basically, the ''Super II,'' as analysts refer to it, will include as standard equipment much of the optional equipment that was available for adding on to the Apple II.

James Magid, a technology analyst for L.F. Rothschild, Unterberg, Towbin, says, ''The Apple II will remain the standard for the industry.'' He also wrote in a report earlier this year that the Apple II models now in service would be useful indefinitely. Mr. Magid made a point, echoed elsewhere, in noting that Apple's greatest strength is an enormous and still-growing software base. Machines are mute until activated by software - the directions that define the functions to be done.

The key to Apple's future rests on its ability to add to its customer base, currently the envy of the industry. In addition to the Apple II and a more professionally oriented Apple III already on sale, the company is reported to be preparing two products for introduction in the fiscal year 1983.

''Lisa,'' an office-of-the-future product, is a work station costing less than $10,000. It combines the attributes of a personal computer, filing system, typewriter and an easy-to-learn-and-use package. It could open new vistas for users that may be even more dramatic than the personal computer has brought so far.

Late in the next fiscal year, at a $1,500 retail price, a model called ''Macintosh'' is expected to bring many functions of ''Lisa'' to the individual in a lower-cost configuration.

Apple's stated goal in new products is to reduce the amount of time needed to learn to use its machines to less than an hour. This would be an important element in Apple's overall effort to maintain its leadership. Eliminating the programming bottleneck has been an elusive goal of computer makers since the beginning.

Some analysts believe that if the ''Macintosh'' is as good as its most optimistic expectations, sales could approach a million units a year in the fiscal year 1984. At present, Apple is selling roughly 350,000 to 400,000 machines a year but at much higher prices.

That's the optimistic case for Apple. But perhaps the stock market is right. Skeptics point to the difficulties the company had in introducing the Apple III and to the inroads I.B.M. made with an aggressively marketed product - much of it in stores where Apple had been the lead product. Doubters also note the continuing proliferation of new personal computers, and they can see nothing but ruinous pricing in a competitive jungle.

The Value Line Investment Survey argues that Apple is relying heavily on the success of its next few products to sustain growth and a leadership position.