Apple Computer

No. 1, In the Red

Last year was certainly an eventful one for Apple Computer Inc. A new chief executive arrived, hundreds of employees were laid off, rumors of a takeover swirled and, miracle of miracles, founder Steve Jobs returned.

Despite all that, Apple entered 1997 facing many of the same problems, planning further layoffs and reeling from an $835-million loss in 1996. Its stock is trading at about $17 on Nasdaq, just above the 52-week low.

The Cupertino-based company has now pinned its hopes on a new operating system called Rhapsody, set to be released in early 1998.

The move puts Apple in the difficult position of having to unveil a system fantastic enough to roll back the Microsoft juggernaut in personal computers. Apple came up with such a transcendent product in 1984 when it introduced the Macintosh. But can the company do it again?

“That is increasingly unlikely,” said James Poyner, an analyst at Oppenheimer & Co. in New York. Poyner said that even if Apple’s new system is a breakthrough, the company has already lost too much ground and too much of its technological advantage to PC standard-setters Microsoft and Intel.

Apple remained the world’s third-largest PC manufacturer in 1996, but its share of the market dwindled from 7.9% in 1995 to 5.3%, and the number of computers the company shipped fell 21%, according to Dataquest in San Jose.

Under the leadership of Gilbert Amelio, Apple moved aggressively to cut costs during the year. The company’s work force shrank 24% to 13,400 employees.

But then Apple announced another whopping loss in the first quarter of 1997. Another 4,100 layoffs are planned.

For now, analysts say, Apple has to continue to cut costs and bide time until Rhapsody arrives. But if the company can’t get to a break-even point by the end of the year, and if Rhapsody fails to impress, the next takeover could be more than a rumor.