Apple to Fire 4,100 Workers, Trim Mac Line
Apple Computer Inc. announced on Friday that it will fire 4,100 employees--30% of its 13,400-person work force--and drastically cut back its line of Macintosh personal computers in its continuing efforts to return to profitability.
Apple is projecting between $1.6 billion and $1.7 billion in revenue for the quarter ending March 28, a drop from $2.1 billion in the previous quarter. Severance packages for the 2,700 permanent employees and 1,400 contract or temporary workers will result in most of a $155-million charge it will take for the quarter.
Cupertino, Calif.-based Apple, the No. 4 computer maker, will begin issuing termination notices at the end of the month.
Among the product casualties is the popular Performa line of low-cost Macintoshes for home use. Apple said that next month it will introduce a low-cost line of Power Macintoshes as a replacement.
Scheduled for phasing out is Apple’s highly touted Open Doc, a promising plan to link productivity software, such as word processors or databases, so that information could be easily transported between working files. The company will include the technology in an upcoming release of its Macintosh operating system but will offer no further upgrades. The company’s release of Rhapsody, a radical new version of Macintosh operating system, is still expected to come at the beginning of 1998.
As expected, the company will halt further design of the Pippin, a CD game player designed by Apple and licensed to manufacturers like Japan’s Bandai Co., which sells the machines under its own label.
Surprisingly, however, Apple’s palm-size Newton computer, which has yet to win over a significant number of consumers, will not be jettisoned, as had been rumored.
The moves Friday are being taken to cut $400 million in overhead to allow Apple to be profitable at revenue of about $8 billion.
The restructuring is the latest in a series of dramatic actions undertaken by Apple Chairman and Chief Executive Gil Amelio since taking the reins of the troubled computer maker 13 months ago. It comes on the heels of a disastrous December quarter in which Apple lost $120 million and amid heightened speculation that little can be done to save the company once synonymous with technical innovation and excellence.
Since taking the helm, Amelio has reorganized the executive suite twice and watched as about 4,000 employees have walked out the door. In December, Apple purchased Next Inc., the software company started by Apple’s co-founder Steven Jobs, and in January brought Jobs and co-founder Stephen Wozniak back to the company as advisors.
Amelio, a self-described “corporate transformation” expert, said Friday that Apple is on the cusp of recovery--the same claim he made before the calamitous quarter that led to the layoffs.
Despite the setback, Amelio said the company has made significant strides in the last year--among them resolving its cash crisis, replacing deficient products and, perhaps most important, making sense of its muddled research and development effort.
Amelio said a plethora of research and development projects had made Apple inefficient. A more streamlined Apple will allow the company to concentrate on markets where it has enjoyed a strong following, especially education and desktop publishing, he said.
The Apple that emerges under Amelio’s watch will be much smaller. Not only is the company’s work force shrinking, but its market share has diminished from 7.9% in 1995 to 5.2% last year and $8 billion in revenue is $3 billion less than its peak and $1 billion less than only a year ago.
“The strategy is not to chase market share,” Amelio said. “Great products will lead to better market share.’
