Originally created 03/15/97

Apple set to lay off 2700



SAN JOSE, Calif. - In a dramatic bid to stem its losses, Apple Computer Inc. on Friday said it would lay off 20 percent of its work force, or about 2,700 employees, and pare its line of Macintosh computers and software.

Apple said the restructuring would cut into its bottom line this quarter by $155 million but was intended to reduce annual operating expenses by $500 million.

The retrenchment is Apple's latest to try to reverse chronic losses and shrinking market share for its flagship Macintosh personal computers.

But despite their severity, the reductions were not as drastic as recent speculation that predicted Apple layoffs of up to 5,000 workers, or nearly 40 percent of Apple's 13,400 staff. In addition, Apple's announcement made no mention of its Newton handheld computer, which some have expected would be dropped.

The company said it would simplify its offerings of Macintosh computers and Power Book laptops. It also would try to cut costs by using technologies developed by other companies instead of developing them in-house.

Apple said it would deliver its next-generation operating system, code-named Rhapsody, next year as planned. But it would cut spending on future upgrades of the Mac OS. It would reduce the number of new releases of its Mac OS beginning next year to one from two per year.

Apple, the nation's No. 4 personal computer company, pioneered the machines in the 1970s and in the 1980s gained the intense loyalty of consumers with its easy-to-use Macintosh.

But in recent years the company has stumbled badly. Aside from other problems, Apple has been saddled with higher costs than its competitors because - uniquely among PC makers - it makes both hardware and software.

It also lost ground to rival PCs that run on Intel Corp. chips using Microsoft's Windows operating software. Windows is seen by many to be almost as easy to use as Apple's Macintosh. Apple's claim of the overall PC market fell from 7.9 percent to 5.2 percent this past year.

The cuts in Apple's 13,400 work force are just the latest. The company cut 1,500 jobs last year as part of a restructuring implemented by Chairman Gil Amelio, who was hired 13 months ago to turn the company around. He also vowed to make Apple more efficient and focused.

But Apple's long and costly effort to revamp its operating software, which controls a computer's basic functions, finally collapsed last summer.

In December, Apple stunned the high-tech world by buying Next Software Inc. to make its technology the basis of a new operating system. The $430 million deal also brought back to Apple co-founder Steve Jobs, who started Next after his ouster from Apple in a boardroom power struggle in 1985.

But slow sales during the fall quarter - usually a strong one for PC companies - resulted in a $120 million loss. Mr. Amelio then ordered the latest restructuring intended to cut $400 million in annual costs and make money on $8 billion in revenues, down from $9.6 billion in fiscal 1996.