CUPERTINO, Calif. — Apple Computer Inc.'s new marketing director stood in his office last week praising the rainbow-colored apple logo that adorns the company's products.
"It's a terrific symbol. People love it. It's soft. It's warm. It's friendly," said Michael K. Lorelli, pretending to hold a large, round object. "I mean, don'tcha just want to wrap your arms around it?"
Consumers and educators indeed have been quick to embrace Apple's products, giving the 8-year-old company a dominant position in personal computers at home and school. But in the business arena, where analysts say Apple must succeed if it is to maintain a leadership position in the market, executives have been less affectionate.
"Business is a different animal. There's no doubt about it," says Lorelli, who several months ago left a marketing job at Playtex to join Apple. Apple is a Fortune 500 company whose annual sales this year are expected to reach $2 billion. However, its inability to fend off International Business Machines on the business front has seriously eroded its market share. Analysts predict Apples will account for 24% of all mid-priced personal computers sold this year, or 15.5% of all dollars spent in that market, compared to a 31% share on a unit basis in 1980 that brought it a 35.6% dollar-share.
Computer analysts say the battle for the business dollars--65% of the market--will intensify next year, with sales of machines in the $1,000 to $5,000 range increasing 20% to $17 billion. They say Apple's market share is likely to slip even more.
The question facing Apple after its trumpeted reorganization last spring and the resignation of co-founder Steven P. Jobs two weeks ago is whether a corps of marketing whizzes recruited from consumer giants like Pepsico, Playtex and Eastman Kodak can sell computer hardware as successfully as they have marketed soft drinks, bras and cameras. Moreover, can they do it during a computer industry slump? So far, Apple president and chief executive John Sculley--who Jobs enticed away from Pepsi in 1983 to bolster Apple's marketing effort--has had as many failures as successes. With Jobs gone, responsibility for the company's performance rests solely on Sculley's shoulders.
Analysts say that good technology, abundant cash and a strong foothold among consumers and students ensures that Apple will remain a prominent computer maker. But they warn that unless the company boosts sales to small- and medium-sized companies and reverses a 5-year trend of steadily eroding market share, it likely will fall to a "second-tier" position within the desk-top computer industry 1988.
That, analysts say, will put Apple in the league of computer manufacturers like Compaq and Tandy/Radio Shack, which, though sound companies, are not powerful enough to play the leadership role that Apple has shared with IBM. More importantly, they say, that would undermine competition in all market segments and sap incentive for innovation.
"Right now it's really IBM and Apple in first place," says Richard H. Matlock, president of Infocorp, a market research firm that sits about a block from Apple's headquarters in Silicon Valley. "Without competition, all personal computer users will suffer. Apple keeps IBM from getting sloppy--and from dictating terms to dealers."
Recognizing the urgency of making a solid foray into business, Sculley reorganized the company in May and has since made an all-out effort to convince Wall Street that Apple is no longer a brash, arrogant upstart that champions counter-corporate culture, but a mature, market-driven company with consistent policies.
Ever since the reorganization of the company kicked Jobs upstairs and away from day-to-day affairs, some analysts and former employees have wondered how Apple would maintain its "spirit." Who, they ask, would inspire the company with fresh, innovative ideas? Apple executives scoff at the notion that there is any problem.
The executives insist Apple will continue to be "product-driven as well as market-driven." But Apple clearly no longer intends to be the risk-taker it has been since Jobs and partner Stephen Wozniak created a machine that founded not only Apple, but the entire personal computer industry. Apple's executives hint that the company will produce a steady stream of innovative machines, but that each will follow--rather than try to shape--the desires of users.
Last spring's reorganization eventually led to the acrimonious departure of Jobs two weeks ago, when the 30-year-old multimillionaire angrily resigned as chairman, taking five top Apple employees with him to start a new venture. Apple fired back with a $5-million-plus lawsuit against Jobs. The drama brought more negative publicity to a company whose late product introductions and flip-flops in strategy in recent years made it appear confused and unreliable to many Wall Street analysts and executives.
Vote of Confidence