Apple Computer Strives to Return Glow to its Sales

AT last! Apple Computer finally had good news for its stockholders and legions of dedicated customers - the folks that some computer enthusiasts refer to as ``MacFanatics.'' Apple chairman John Sculley announced last week that better-than-expected growth in sales of the Macintosh II computer should boost earnings for the quarter ending March 30. Coming after an 11 percent downturn in first quarter net income, the upbeat assessment should help put a bit of glow back in Apple. During the first quarter, which ended in late December, and which is considered Apple's best quarter given holiday sales, Apple's net income plummeted to $124.8 million, down from $140.5 million the year earlier.

Analysts who follow Apple on a day-to-day basis expect decent but not spectacular growth this year. One typical Wall Street reaction: Carol Muratore, who watches Apple for Morgan Stanley and Company, has a ``hold'' rating on Apple stock, which has been trading in the $36 range on the over-the-counter market. In other words, investors should hold on to Apple stock they now have but not add to their position.

Ms. Muratore now expects Apple to surpass last year's earnings of $3.53 a share. Late last week Muratore upgraded her earnings projection to $3.67, up from the $3.50 that she had been anticipating. Earnings for 1991 look better at around $4.50 a share.

What's happening with Apple, once considered one of the true innovators among US companies? Apple, after all, is the Cupertino, Calif.-based company that virtually delivered the personal computer to Americans - and made it fun to operate in the process. Under Apple's co-founder, Steve Jobs, the company developed a reputation as a brilliant high-tech idea factory. Apple was considered a workplace where creativity was nurtured and the impossible dared. But Mr. Jobs left in 1985, following an unsuccessful struggle for control with Mr. Sculley.

In recent years, aggressive and cash-rich rivals have marched briskly into the personal computer market. Earlier this year, Apple looked like a corporation in deep trouble, as a number of top executives left in a nasty front-office reshuffling that was played out in the business pages of daily newspapers. Apple also announced a number of layoffs for the firm's work force, while deep cost-cutting measures were implemented.

Today, leadership at Apple revolves around Sculley and Michael Spindler, who last week was elevated to the post of chief operating officer and is considered an eventual successor to Sculley. Mr. Spindler, who goes back to the Steve Jobs era, replaces Allan Loren, who resigned as president. Mr. Loren has taken much of the heat for Apple's slowdown in domestic sales.

Apple was a rousing success story up until about a year ago. Sculley made the Macintosh the focus of his marketing efforts. The Macintosh commands about 10 percent of the overall business computer market. But the Apple II line, more than a decade old now, is losing ground at schools and colleges.

Apple's main problem, say experts here, is essentially managerial. During the late 1980s, Apple concentrated on holding up its pricing structure rather than seeking to move to the lower end of the pricing scale. Moving to the lower-end of the model scale would have presumably helped Apple increase its market share. Thus, says Abigail Christopher, who follows Apple for International Data Company in Framingham, Mass., Apple did not move quickly to introduce a low-cost personal computer. (A lower-priced Macintosh could be introduced by the end of this year, she says. Analysts were not expecting one to be announced at a trade show scheduled for yesterday in northern California.) Nor did Apple seek to introduce a relatively low-cost business computer in the $2,000 to $3,000 range.

The upshot? Apple is still No. 2 in personal computers, an industry now beset by overcapacity. Apple's competitors now offer products that cost less, experts say, yet can often duplicate Apple's highly regarded clarity of graphics.

Can management restore Apple's luster?

``1990 is going to be a tough year for Apple,'' says Ms. Christopher. ``I see revenue growth of no more than 10 percent, which is what the company itself is now expecting.''