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At the Dec. 20 press conference announcing the acquisition of NeXT Software Inc. and heralding the part-time return of Steven P. Jobs, Apple Computer Inc. Chief Executive Gilbert F. Amelio explained his reasoning this way: ''We chose Plan A instead of Plan Be''--a reference to Apple's widely reported, and eventually abandoned, talks to buy Be Inc.

It might have been more apropos to call it Plan D--for desperate. Having ruled out other options, Apple accepted an imperfect solution that is full of technical holes. True, years of mismanagement had left Amelio's operating-system development team with no easy answer--it was clear by last winter that Apple's effort to develop its Copland operating system was a mess.

And the company had publicly promised to come up with an operating-system strategy by early January. Still, trying to cobble the Macintosh personal computer around NeXT technology isn't going to satisfy customers or give Apple an edge over its ever-more-potent rivals.

CAN OF WORMS? The NextStep operating software that Apple will use to upgrade the Mac is nine-year-old technology. NeXT's WebObjects Internet technology has generated some excitement, but NeXT long ago lost the operating-system wars to rivals such as Microsoft Corp. Indeed, despite its efforts during the past two years, NeXT couldn't even muster enough credibility to launch an initial public offering in the hottest IPO market in history.

In buying NeXT, Apple executives are trying to rescue their failed operating-system strategy. But all they have done is acquire a company that has taken nearly a decade to carve out a barely profitable niche business. Apple Technology Chief Ellen M. Hancock should know the shortcomings of NeXT technology as well as anyone. Her former employer, IBM, gave Jobs a reported $50 million in the late 1980s for access to NeXT software. In the end, it did little with the technology. Recently, IBM considered a plan floated by former Lotus Development Corp. chief Jim P. Manzi to buy NeXT. IBM passed.

Apple execs talk up the deal by saying that they now have the sophisticated software to make inroads into the corporate PC market, where Apple has only a

tiny 2% share. But NeXT's software is used primarily in the financial services industry. Its niche market means that few independent software developers write programs to work with NeXT. In other words, the NeXT strategy doesn't address Apple's need for software that would have broad corporate appeal, and NeXT does nothing to help Apple hold on to its core customer base in education and consumer markets. Meanwhile, Microsoft is

solidifying its dominance of the corporate and consumer markets and is eyeing Apple's stronghold in education.

The most troubling aspect of the NeXT deal, however, is the question it raises about compatibility: It's not at all sure that Apple's NeXT operating system will be able to run the millions of Mac programs that were sold in the past 13 years. Amelio has promised to lay out more details at MacWorld in San Francisco on Jan. 7, but it's already clear that today's Mac owners won't be able to run their titles on the NeXT-based operating system until 1998, if then. Apple's probable plan: continue to improve the current Mac System 7 for current Macintosh owners and then wow shoppers with hot new technology that will entice them into trading in old machines.

That's what happened when the Macintosh replaced the Apple II. But the Mac was ahead of its time and a genuine breakthrough. NextStep just isn't in that class.

By Peter Burrows

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Updated June 15, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.
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