When a group of former Apple Computer Inc. engineers set out three years ago to create software for designing and creating Web pages, they built it on a Mac. It took another year before a Windows version of that product–now called PageMill, from Adobe Systems Inc.–emerged.
But today, the tables have turned. Last month, Adobe released a new version of the product, this time hitting the Windows market first. A Mac version, relegated to second-place status, isn’t due until this summer.
It was a hard choice for Adobe, a San Jose, Calif., company that still sells about half its products to Mac users. But changes in the market, chiefly Apple’s steadily shrinking market share, forced Adobe’s hand. “We wanted to lead with the platform small businesses are on, which we believe is Windows,” said Rick Brown, Adobe’s PageMill product manager.
Adobe’s experience illustrates one of the fundamental challenges facing Apple as its struggle to bounce back shifts from crisis mode to a more sustained effort. While it remains too soon to know what kind of Apple might emerge, early indications are that the Silicon Valley icon is making some strides, yet at the same time must confront deep-seated problems.
On the plus side, the Cupertino computer maker’s stock has risen sharply since it turned a profit for the last three months of 1997. Apple continues to raise the performance bar on its newest machines. A new television ad campaign and more positive press are polishing its image.
In fact, the mood among company followers has brightened considerably since last fall, when some said they’d never buy a Mac again after interim chief executive Steve Jobs pulled the plug on Mac clones.
But more troubling, Apple’s sales are still declining sharply, and its market share has continued to plummet while the rest of the market for personal computers has been growing at double-digit rates. The company still lacks a sub-$1,000 model, the price range at which almost half of all PCs are sold these days. Microsoft’s Windows operating system has caught up with, and even overtaken, the Mac OS in some areas, giving Macs less advantage over PCs.
In the critically important community of people who develop software for the Mac, the mood is still cautionary, especially after recent cancellation of the Newton hand-held device. And a significant amount of Apple talent is fleeing the Mac platform to do something they never thought possible: embrace the world of Windows.
“It is make-or-break time,” said Daniel Kunstler, senior equity analyst with J.P. Morgan Securities. “An eroding tech business is an oxymoron. It doesn’t stay in business long. They’re close to that bedrock, and their revenues have to bounce off that bedrock and start to rise again.”
Apple executives declined to discuss the company’s fortunes. But a spokeswoman hinted the cone of silence might soon be lifted. Three coming events–an earnings announcement Wednesday, the annual shareholders meeting April 22 and the annual worldwide developer conference in May–will give the company ample opportunity to tell the world how it plans to move forward.
Apple’s popular new G3 Macs are proving to be a boost, because along with their higher price tags come higher profit margins. These computers have appealed to graphics professionals, a mainstay of Apple’s business. A new education-oriented machine just released could help reverse Apple’s sagging fortunes there.
On top of the recent quarter of profitability, analysts expect the quarter just ended in March to be profitable as well, due to serious cost cutting. Earnings are expected to be about 17 cents per share, or $23 million overall.
Yet revenue is still off dramatically, and market share continues to fall with each new report.
Sales, which peaked at $11 billion three years ago, now run at an annual rate of less than $6 billion. Market share, as high as 12 percent not long ago, has tumbled to 2.8 percent. And in the education market, long an Apple stronghold, market share has fallen by 56 percent.
Perhaps the most difficult question to answer about Apple’s future is: Where are the new applications?
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Apple makes much of the fact that Microsoft released its Office 98 collection of applications for the Mac before the Windows version. And along with Microsoft’s investment of $150 million in Apple last year came the promise that Microsoft would continue developing Mac applications for five years. The number of Mac developers at Microsoft is growing, not shrinking, said a Microsoft executive. “With 200 people working on Macintosh software at Microsoft today, I believe that we continue to have the largest Macintosh software teams in the industry outside of Apple,” said Ben Waldman, general manager of Microsoft’s Mac division.
But where are the others?
At the influential Demo conference of developers in February, where new products vie for the privilege of debuting, only one new Mac application was shown among 60 entrants. The rest of the cutting-edge applications, such as continuous speech-to-text interpreters, voice recognizers and visual user interface programs, all were built on Windows.
Demo producer Chris Shipley said the number of Mac applications she sees coming to market has dwindled over the past two years. In preparing for Demo 97, she says, she sought out Mac products specifically. “I told Apple, `If you represent 10 percent of the market, I’m going to reserve 10 percent of my space for Mac products,’ ” she said. “It was tough to fill those spaces.”
This year, the coveted Demo spaces were opened to all comers. There was just one Mac product–a graphics program capable of searching through images–that made the cut.