04/29/96 APPLE: TICK, TOCK. TICK, TOCK

APPLE: TICK, TOCK. TICK, TOCK
Can Amelio's master plan stop the cash drain in time?
When the bad news came, it was even worse than anticipated. On Apr. 17, Apple Computer Inc. announced a loss close to what had been forecast: A $740 million deficit for the quarter that ended Mar. 29. But it was the rest of the announcement that really stung: Quarterly revenues plunged by 18%, to $2.2 billion, as Apple's U.S. Macintosh computer sales hit the skids. Gilbert F. Amelio said he would ax a further 1,500 employees, raising total layoffs under way to 2,800. Worst of all, the company's cash on hand plunged from $1.1 billion at yearend to just $592 million at quarter's end.
Deteriorating finances raise doubts as to whether Amelio can accomplish a turnaround. Full details will be unveiled in May, but Amelio says that he hopes to focus the company on catering to Internet users. Other insiders say he will try to turn the Mac into the BMW of computers, beefing up features and technology aimed at publishers, graphic artists, and other loyal Mac buyers. Meanwhile, he's hoping to cede some low-margin and emerging overseas markets to partners, who will license Apple Mac's operating system.
SURVIVAL QUESTION. But time is running short. Amelio says Apple will be profitable within a year. With gross margins at just 9%, down from 26% in last year's March quarter, and with cash reserves plummeting, the question is whether Apple will have enough money to fund Amelio's plan. ``They got killed,'' says Dean Witter Reynolds analyst Eugene Glazer.
Trouble was brewing with Amelio's plan even before the latest financial blow. Apple's crucial next-generation Mac software, dubbed Copland, is behind schedule. And delivery could be slowed even more if turmoil develops in the wake of the Apr. 15 resignation of David C. Nagel, head of research and development, who is leaving to take the top job at AT&T Labs. For now, Amelio is taking over as R&D head. Amelio now says Copland will be delayed into 1997 so it can be adapted to the Internet.
The licensing plan is not going any better. With sales plunging, many would-be licensees give Mac cloning a thumbs-down. Dell Computer CEO Michael S. Dell says he continues to nix the idea. Acer America President Ronald Chwang is more polite: ``We probably will listen to their pitch...but I don't know how viable [a Mac clone] is today.'' IBM is expected soon to announce a licensing deal. But Big Blue only plans to resell the software to other would-be cloners.
Still, Microsoft Chairman William H. Gates III argues that it's too early yet to judge Amelio's progress. ``I think Gil's very impressive,'' says Gates, who met recently with Amelio in Redmond, Wash. ``He deserves a honeymoon...a period of time where he's allowed to assess things and come up with a strategy.'' Maybe. But the honeymoon has probably just ended.
By Peter Burrows in Cupertino, Calif., with Kathy Rebello and bureau reports