Productive moves for Apple

In announcing his second reorganization in 13 months, Apple Computer's (AAPL) CEO Gil Amelio

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declared that the company's goals would be better met by simplifying product lines and stopping investments in activities "not central to the core businesses."

Today's restructuring announcement represents the bulk of Apple's employment cuts, but Amelio said the company is still evaluating further product cuts, outsourcing options, and the possibility of spinning off some units.

Amelio added the company will curtail its commitment to developing network- and Internet-related software, as well as its speech technologies and Game Sprockets developer kit, by cutting investments earmarked for those efforts.

In addition, Apple said that it is altering the delivery schedule for the Mac OS releases beyond Mac OS 8, which is slated to ship in July.

Amelio hinted earlier this year that Newton technologies may be dropped. They are still evidently being shopped around to interested parties. When asked if the Newton-based products were among those to be discontinued, Apple's vice president of marketing Guerrino De Luca seemed to indicate that Apple hadn't made up its mind yet.

"One of the very few parts of the company that is not touched by layoffs is Newton. We're keeping the division intact. The reaction of customers and reviewers to the products are very good. We're keeping all the options open regarding the future of Newton within the company," he said.

Products based on the Newton operating system include the MessagePad 2000 and the eMate 300. The MessagePad 2000 is a handheld mobile computer for the business market that features handwriting recognition. The eMate 300 is a low-cost mobile computer for educational markets featuring multiplatform desktop and network connectivity.

The most notable change in the product offerings that seems to fit the restructuring's mandate will be the phasing out of the Performa line of Macintosh computers. In April, the company will introduce new consumer models that will only be sold under the Power Macintosh brand name.

"Every other PC maker on the Intel side has a couple of lines to differentiate their products, but I don't think it's too big a concern for Apple. They hadn't managed [the Performa brand] well to date, anyway," said Kimball Brown, an analyst with Dataquest.

The Performa line was created in 1992 for the retail consumer market and originally featured the 680x0 processors from Motorola. At one point, Apple offered as many as five different product lines aimed at different audiences, each with different names and model numbers. Since last year, the Performa and the Power Macintosh represented systems aimed at consumers and business users, respectively.

"This is an element of simplification of marketing. This has nothing to do with getting out of certain channels," said De Luca. He also stressed that the company isn't ceding the low-margin consumer market or any other market sector to Mac clone makers.

However, Bret Rekas, an analyst with Donaldson, Lufkin and Jenrette, said Apple's decision to shift its low-end Performa consumer PCs to the Power Mac group will not save the company a lot of money.

"It'll just be a box with a different logo. They'll save some money on marketing, but it'll be nominal. You'll still be marketing to the same market and the same group of people," he said.

Not all is doom and gloom for Apple, according to Brown. "We think Apple will have a fabulous year ahead in terms of hardware. They have a notebook that blows ahead of Intel, and across their product line, clock speeds look really good," says Brown.

Brown thinks Apple will be in good position to take advantage of a surge in demand created by an upgrade cycle. What this means is that the company saw strong demand for its products when the Power Macintosh was first introduced, and now buyers are ready to upgrade those machines.