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Apple cuts to the core

Apple Computer plans to lay off 2,700 employees - almost a quarter of its workforce - in the final phase of a restructuring plan that began last month.

In addition, the company will cut 1,400 contractors and temporary workers and abandon several technology projects that have not been paying their way.

Apple has lost almost $1bn in the last 15 months, and the cuts are part of CEO Gil Amelio's plan to shave "$500m or so" from its operating costs this year. His intention is to create "a streamlined organisation, the simplification of our product lines and the discontinuation of funding for projects and technologies that are not central to our core business strategy".

Apple will concentrate on selling computers to the education, consumer and electronic publishing markets - the three sectors where it has had the most loyal users.

Amelio hopes to put an end to the setbacks that Apple has suffered in the last year. The company expects a small loss in the third quarter and a return to profit by the end of this year. Then, in 1998, Amelio says, Apple will attempt to regain some of the market share that it has lost.

Amelio blames the company's current weakness on "lack of business discipline and fragmentation in our activities". This refers to Apple's habit of inventing interesting technologies that fail to return a profit. He intends to cut Apple's high R&D costs by abandoning projects such as OpenDoc, a programming system that cost hundreds of millions of dollars to develop, only to be overtaken by the enormously popular Java programming language.

Apple's Open Transport networking system was also on the hit list, along with a speech recognition system, and a Mac version of Unix called AIX. Apple will still include most of these products in the current Mac operating system, but they will not be included in Rhapsody, the new OS Apple plans to release next year.

Surprisingly, Apple didn't dump the much-mocked Newton. Two new Newton products, the MessagePad 2000 and the e-Mate 300, seem to have earned it a reprieve.

Wall Street's response has been muted so far. Apple's R&D costs are still twice the industry average and some analysts say that the cuts should have been even deeper. Reaction within the computer industry is more favourable, though, and Mac software developers point out that Apple needs to maintain fairly high R&D costs while it works to complete Rhapsodyn

Cliff Joseph