07/22/96 WILL GRAY HAIR BE AN ASSET TO APPLE?

WILL GRAY HAIR BE AN ASSET TO APPLE?
Amelio's SWAT team has plenty of experience-but not in PCs
The old saw about Apple Computer Inc. needing some adult supervision can now be shelved. On July 3, Chief Executive Gilbert F. Amelio added the final member to his senior management team: Ellen M. Hancock, the 53-year-old former IBM and National Semiconductor Corp. exec who will be Apple's chief technology officer. With her hiring, Amelio, in his job since February, has assembled a five-person executive staff at Apple's Cupertino (Calif.) headquarters, with some 140 years of combined high-technology experience.
Trouble is, none of that experience is in the PC business. That has experts questioning whether Amelio's team has what it takes to reverse Apple's dwindling fortunes at a critical juncture. Five months into Amelio's tenure, Apple sales are slipping badly in key markets. Home Mac sales are down as much as 30%, say some retailers, and even suppliers in Mac hotspots such as publishing report no growth. On July 17, the computer maker is expected to report its third straight quarterly loss, which Montgomery Securities analyst Kurtis King estimates at $204 million.
Apple has said to expect losses for now, but investors are deeply unhappy. Shares are trading at a 10-year low of 19, down from 30 when he arrived, and there are revived press reports of a sale of part or all of the company. Says Standard & Poor's Corp. analyst Molly Toll-Reed: ``If there's no progress in six months, you'll have to question the whole management strategy.''
The executive team insists that Apple's predicament is nothing some management discipline can't fix. ``It'll take three years to return the company to a success model, but I believe we'll see gradual improvement from here on in,'' says Chief Financial Officer Fred Anderson. Among the changes in the offing: Apple is recruiting two new directors, and company co-founder A.C. ``Mike'' Markkula is expecting to leave the board, according to one source. Insiders deny that Apple needs to sell off chunks of the business. ``The reason we would sell a business is to raise cash, but we have a healthy balance sheet right now,'' says one of Amelio's direct reports. Still, the executives are staring a deadline in the face: The company's stated goal is to return Apple to profitability by next March.
That means the top team needs to bone up now on the ins and outs of the PC business. And some of Apple's newcomers have a decidedly mixed employment record. Anderson helped manage minicomputer maker MAI Systems Corp. through the PC revolution. But Scalise was bumped from Maxtor Corp. in 1991 amid mounting losses. And Hancock went to National after being passed up for a top software job by IBM boss Louis V. Gerstner Jr. One mistake: backing an IBM technology instead of jumping on the Internet bandwagon. Hancock says she was late to grasp the significance of the Internet, but adds: ``I'm very supportive of a strong Internet play now.''
Much of the immediate work that needs to be done will fall to Landi, a 1995 arrival from chipmaker Texas Instruments Inc. who headed Apple Europe before Amelio promoted him to COO in May. His mission: to mend fences with customers and partners, irked by Apple's arrogance. He already has met with more than 150 of them. He is also trying to bring out a new collection of Macs this fall and has begun to put PowerBooks back on retailers' shelves--left empty for 60-plus days, distributors say, after a May recall. Landi also is putting in motion a key element of Amelio's restructuring plan, announced on May 14: cutting in half the number of Mac models by mid-1997.
Will these moves be enough? Not even close, say experts. The only surefire solution to Apple's woes lies in innovative technology. That's Hancock's mandate. And on July 9, just 36 hours into her new job, the 29-year IBM veteran met with key staffers to discuss how to light a fire under Apple's coddled software engineers, who have been struggling for years to deliver Apple's new Mac operating system, dubbed Copland. ``We have a lot of 25-year-old wizards around here,'' says Hancock. ``My skill is getting things to market.''
Well, maybe. Critics say IBM missed the boom in networking gear because Hancock failed to deliver on a key product. And she's known more as a buttoned-down manager than as a visionary. While experience counts in Silicon Valley, ``the complexity when you come to Cupertino increases exponentially,'' says one Apple manager. Apple's new team will have to master the new math.
By Peter Burrows in Cupertino