It's all change at Apple

Will radical restructuring save the company, or is something more needed?

Apple Computer has just undergone its second major restructuring in a year, after January's loss of $120m - much larger than either Apple or Wall Street had expected - on top of total losses of $816m in 1996.

In response, Gil Amelio, Apple's chief executive officer, is using this reorganisation to streamline the company and cut its running costs by $400m. He hopes this will enable Apple to return to profit by the end of this year.

The cost-cutting could lead to as many as 3,000 redundancies. However, the most immediate result has been the mass departure of many of Apple's top executives. This is hardly a reassuring sign but, amid all this turmoil, a new version of Apple is starting to take shape.

After his appointment last February, Amelio divided the company into eight semi-autonomous divisions, each with responsibility for specific product groups. The new structure divides the company into seven units that control business functions, such as R&D and marketing, for the entire company. This represents a complete about-turn, as it once more centralises power into the hands of Amelio and a small group of hand-picked managers. Amelio admits that he still prefers a divisional structure, but he will not return to it "until we're very healthy, and not until I've built the management infrastructure and corporate culture that will allow it to be successful".

It's that corporate culture that seems to be the root of Apple's problems, and the turmoil Apple is going through is the result of Amelio's attempts to take it apart and start all over again.

He has openly criticised the "unbusinesslike" culture that he inherited, and the lack of accountability among managers when things went wrong. With that in mind, this latest reorganisation looks very much like a house- cleaning exercise. The company is losing vice-presidents on an almost daily basis. Six of its top executives have left in the last month, and several less senior managers have been moved or laid off.

The reasons for the departures are varied. Heidi Roizen, vice-president of developer relations, left before the reorganisation "to spend more time with her family". Roizen is a respected figure in the industry and her departure was initially taken as a worrying sign of instability within Apple. But spending time with your family does not have quite the same connotations in the US as it does here, and it is now accepted that Roizen's explanation was genuine.

Some of the departures were straightforward redundancies, as Apple's new, centralised structure requires fewer divisional heads. A more significant event was Marco Landi's resignation on 19 February. His departure was a direct result of the reorganisation, in which he was moved from chief operating officer to vice-president for world-wide sales. Apple denied that this was a demotion, but sources within the company say that Landi was blamed for the unexpectedly large loss in January. And in the new Apple, heads roll when things go wrong.

In fact, some heads roll even when things go well. Ellen Hancock, formerly Apple's chief technology officer, also suffered in the shake-up. When Apple abandoned its project to develop a new operating system, Hancock was brought in by Amelio to lead the search for a replacement. Apple's purchase of NeXT Software means that NeXTStep will form the basis of a new operating system scheduled for release next year.

But when Hancock found NeXT, she found her own replacement at the same time. The new R&D unit is being run by Avadis Tevanian and Jon Rubinstein, two former NeXT employees who report directly to Amelio rather than Hancock.

Amelio's explains: "This company is in a crisis situation. We've got to deliver a new operating system, and for a while I want to be close to that situation and monitor it very closely." That makes sense, but it leaves Hancock sidelined in her new position as vice-president of advanced technology. She has denied that she is about to resign, but her new responsibilities are vague and it has been suggested that she will stay just long enough to preserve appearances.

And it's not just people who get the chop in Amelio's Apple. This month brings a review of the company's range of products. Amelio has already simplified Apple's manufacturing processes and concentrated on a core set of designs for its desktop computer systems, but the review could axe entire product lines as well as research projects lacking immediate commercial potential.

Apple still has problems, but Amelio's changes are beginning to produce results. Although it continues to lose money, the company has cash reserves of $1.8bn to fall back on. New products launched last month have also been well received.

The big question now is whether the new Mac OS will come to the rescue. The shake-up may buy time, but a successful product is needed to save Applen

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