August 7, 1997 4:55 PM PDT

Apple product strategy still murky

In the afterglow of yesterday's upbeat news that Microsoft (MSFT) agreed to continue to develop crucial Macworld
saga software applications for the Macintosh platfom, questions now arise regarding Apple's (AAPL) specific battle plan to regain momentum.

Indeed, few details emerged about how the company will direct its product strategies. To be fair, that task may have to wait until Apple finds itself a CEO.

But in the near term, customers can expect Apple to pursue one obvious strategy: make everything go faster. The obvious tools to accomplish that are the new PowerPC 750 and 740 processors.

Probably one of the earliest products to get the new processor will be a new PowerBook notebook computer based on the current PowerBook 3400 design. Apple is expected to release a PowerPC notebook later this year based on the new 750 processors that will far outpace the fastest currently shipping PowerBook 3400. Apple will also be able to use the new PowerPC processor in current Power Macintosh desktop systems that use the 603e, such as the 6500 and 4400 series systems.

The freshly minted 740 and 750 PowerPC chips offer speeds up to 266 MHz and should zoom up to 400 MHz next year.

An Intel-compatible server is also expected, primarily because it is the platform on which the largest number of applications run on. At Next, Jobs built operating systems and application development tools that run on Intel machines. (Intel is an investor in CNET: The Computer Network.)

"An Intel-compatible server could be in the picture. The question is what operating system do you want to run," says Chris LeTocq, an analyst with market research firm Dataquest.

"You could use Solaris (Sun Microsystems' operating system), Rhapsody, or Windows NT (a server OS from Microsoft)," he said. "NT for PowerPC is gone and there are no applications. So it's probably NT on Intel," he added.

The Microsoft agreement announced yesterday did not include any agreements to use Windows NT, although previous discussions on the topic have been held by the two companies, said Fred Anderson, Apple chief financial officer. Anderson made the comments yesterday at a press conference.

"NT was not part of this agreement and there are no current plans on this, but this doesn't forego something in the future," Anderson said.

Internally, Apple's starting point for its server product strategy appears to be Rhapsody, the company's next-generation operating system, which is expected to be released in final form by mid-1998. Apple's current operating system strategy is to make Rhapsody available first as a server OS.

A version of the new OS is also being developed for use on Intel processors. Rhapsody will offer backward compatibility with current Mac OS applications when used on PowerPC hardware but could conceivably be used in conjunction with technology from the Windows NT operating system.

Whatever the future holds for Apple, the company may find itself pulled in different directions thanks to new board members and new money. New money came from Bill Gates, and he is likely to work to persuade Apple to come up with a more coordinated strategy for running Mac clients on Intel-based Windows NT servers.

The push into server computers could help Apple in its core education and 'content creator' market, by providing hardware to tie Mac desktop computers and new network computers to servers.

Under the influence of Larry Ellison, CEO of Oracle, the education market in particular may be the focus of efforts to develop a 'network computer' that is tied to a central server computer. In fact, Apple's Newton division is producing a product for the education market called the eMate 300 that could be used as a network computer.

Network computers, as defined by Ellison, are computers that rely on powerful central servers to get software programs.

Microsoft may also tap into Apple's expertise in software that runs on set-top boxes. These devices allow TVs to be used for computing tasks such as electronic mail and Internet surfing.

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