Apple's not so rotten outlook

With latest losses less bad than expected and a well-received new Mac operating system, all it needs now is a new CEO. Cliff Joseph reports

It might seem like clutching at straws, but the news of Apple Computer's latest financial losses has been greeted with something like relief by many followers of the company's fortunes. Apple lost $56m in the third quarter of its current financial year. That might seem like bad news to most of us, but the sudden resignation last week of CEO Gil Amelio had led many Wall Street analysts to predict even larger losses. It's also a lot less than the $706m loss that Apple reported in the previous quarter.

"It's very encouraging," said one analyst with market research company Dataquest. "The company still hasn't been built up to 1996 levels, but things seem to be getting better."

It's still unclear, though, when Apple is likely to return to profit. Before his resignation, Amelio had predicted that the company would be back in the black before the end of this year. But Apple's chief financial officer, Fred Anderson, now admits that this is unlikely and will only say that a return to profitability is "our highest priority".

As always, the computer industry is rife with rumours about takeovers and the choice of Apple's next CEO. Steve Jobs, the original Apple founder who recently returned to act as an adviser to Amelio, had been tipped. He seems to have turned the job down, but will certainly have a great influence over Apple's decision. Apple's huge losses, and the manner in which Amelio was bundled out after barely 18 months, mean that the job isn't an obviously attractive career move for any senior figure in the industry, so Apple has resorted to a head-hunting agency.

Surprisingly, there seem to be few takeover candidates at the moment, either. Fred Anderson says that he has not been approached by anyone within the industry, and Apple's share price rose by 10 per cent after the third- quarter results were not as bad as had been expected, thus making a hostile takeover an expensive option.

Amid all this, Apple is preparing a number of new products that it hopes will boost the falling sales of its Macintosh computers. Today, in the US, it is launching a new version of the Mac OS, the operating system software that drives all of its computers.

Mac OS 8 is a major upgrade, and Apple is planning to present the new software as its answer to Windows 95. It features a "platinum look" that gives the current Macintosh operating system a fairly extensive face-lift. There are many new features that make it easier to use, as well as Internet features such as a built-in e-mail program and the ability to allow other Internet users to see the contents of your hard disk through their Web browser.

An interesting aspect of Mac OS 8 is that it includes many features of Copland, the aborted operating system that Apple spent years developing. The collapse of the Copland project was one of the factors that contributed to Apple's current crisis.

Pre-release versions of the new software have received very good reviews in the US computer press, and Apple hopes that this will rekindle the enthusiasm of its traditionally loyal customers. The new software won't be available in the UK until September, however, as it will take a couple of months to prepare European editions for Britain, Germany and France.

Next month should also see the release of several new Macintosh models, including a top-of-the-range machine based on a new processor codenamed Mach 5. The Mach 5 chip will run at 350MHz, and the new machine should be the fastest computer that Apple has ever produced. Apple is also planning the first US release of an extremely compact notebook computer that was designed in collaboration with IBM, and which has already been a big success in Japan.

The next episode in the Apple saga will be the MacWorld Expo, which opens in Boston on 6 August. The Expo's opening speech is traditionally given by the CEO of Apple, and this year the entire computer industry will be waiting to see who steps into the spotlight on that day