Apple begins a new era Monday when it launches another line of Macintoshes, the most feverishly anticipated personal computers since Apple introduced the original Macintosh in 1984.
If the Power Macs - based on a new microprocessor called the PowerPC - are able to win legions of converts, Apple could become the envy of the industry, thwarting nimble competitors that have scarred the legendary giant of Silicon Valley. If they flop, Apple could become an also-ran.
"This is high-stakes stuff, kind of like a shoot-out at the PC corral," says analyst Bill Bluestein at Forrester Research.
"It's absolutely critical (Apple) makes this a success," adds P.C. Letter's David Coursey. "If not, then the Mac will fade into the sunset - with no one singing Happy Trails."
Until now, Apple's Macintoshes have been based on microprocessor chips, called the 68000 family, made solely by Motorola. In a radical break, Apple is staking its future on PowerPC chips, developed by Apple, Motorola and IBM.
With these chips, Apple promises breakthrough ways for people to use PCs. Power Macs will be able to understand spoken commands, store videotape and create sophisticated graphics and animated presentations - plus run new software at unprecedented speeds.
"Imagine . . .," says Apple Vice President Ian Diery. "Someone (traveling) can call his Power Mac and have the computer translate his electronic mail and speak it to him" over the phone. People attending one recent show watched a Power Mac click into action when a user said: "Computer. Open file," or "Computer. Close file."
Not everyone is dazzled. Apple is "making some pretty big claims," sniffs Curt Nichols, marketing manager at Intel, which makes chips for rival PC makers. "They had better deliver the goods."
Apple will launch three Power Macs initially; more will follow. IBM will introduce PCs based on PowerPC chips later this year. And Motorola is hoping to persuade companies to use the chips in TV set-top boxes, hand-held gadgets and even home appliances.
But Apple, more than its partners, has pinned its fate to the PowerPC chip and its new Macintoshes. Experts say it had no choice but to bet the company because its primary advantage has disappeared.
In its boom years, Apple alone featured easy-to-use, graphics-based software that eliminated the need for complicated, typed commands. In 1990, rival PC makers started offering a softare operating system called Microsoft Windows, a built-in program that mimicked the Mac's friendly features - often at a lower cost. Powered by ever more powerful chips made by Intel, PCs with Windows began to dominate. Since 1990, more than 40 million Windows-based, Intel-powered PCs have been sold vs. 6 million Macintoshes.
To defend its 12% to 14% share of the PC market, Apple has been forced to discount, which has decimated its profitability. The company's net income plunged from $ 475 million in fiscal 1990 to just $ 87 million in fiscal 1993.
"If they stuck with the old way, Apple would have been dead," says David Wu, analyst at S.G. Warburg.
Apple responded with a strategy that would have been unthinkable in the boom years. In 1991, it formed an alliance with arch-nemesis IBM and Motorola. The trio housed 350 employees in an Austin, Texas, building dubbed "Somerset" after the legendary place where King Arthur gathered his knights to strategize.
The team spent more than $ 1 billion developing the chip. They worked round-the-clock and relieved the pressure by playing volleyball games in a sandlot out back.
"My hair was dark when we started this," says graying Somerset chief Russell Stanphill, who offers his 3-year-old photo I.D. badge as proof. The team's goal: "Conquer Intel," he says.
Power Macs will lead the charge. Selling for $ 2,000 to $ 4,500, they initially will complement the current Macintosh line, which starts at less than $ 1,000. Apple executives expect Power Macs to account for 20% of Mac sales this year and 100% within three to five years. Diery says the Power Macs will help Apple boost its market share to 20% to 25% by the end of the decade.
To do that, Apple will have to attract new customers, many who have owned Windows-based PCs sold by competitors such as Compaq, Dell and IBM.
At recent computer shows, Apple and Motorola demonstrated Power Macs next to PCs based on Intel's state-of-the-art Pentium chip. The side-by-side demonstrations drew enthusiastic crowds. Even Intel CEO Andrew Grove made his way into a Motorola booth to check out a Power Mac Motorola product manager Jim Venable noticed Grove "just shaking his head," apparently intrigued. Venable offered to tell him more but Grove just walked away. Other observers were impressed - and "generated more positive word of mouth than anyone expected," P.C. Letter's Coursey says. "I'm looking forward to having one."
Computer experts say the PowerPC chip is speedier than the first version of Pentium, which was launched in August - 1.5 to 5 times faster on crucial functions, according to a study by Byte magazine. "Like bats out of hell," Bluestein says.
"But a powerful chip doesn't guarantee a hit PC," says Compaq CEO Eckhard Pfeiffer, who doesn't plan to use PowerPCs.
The Power Mac's success or failure will hinge how many programs it can run, and how fast. One big selling point is that the new Macs will run virtually all software designed for previous Macs and Windows-based PCs. It will run Windows programs at about the same speed as PCs that use Intel's 386 or 486 chips, though not as fast as Pentium. In the past, Macs could be rigged to run Windows programs, but they worked prohibitively slowly.
The Power Mac will be at its best when running software designed specifically for the PowerPC chip. About 50 to 60 such programs will be available within months. One important supporter is Microsoft, the No. 1 PC sofware developer. Microsoft is expected to have two popular programs - Word for word-processing and Excel for spreadsheet work - available soon. Hundreds of new programs will be out by year's end, Diery predicts, especially publishing and education programs - Apple's core strengths - and programs that feature graphics, animation, sound or voice recognition.
But it's unclear just how many software firms will back PowerPC. Some may be waiting to see how well the Power Macs sell before rewriting software for them. Lotus, for example, is rewriting an electronic mail program for the Power Mac, but will continue to focus on Windows.
Meanwhile, Apple's enemies aren't standing still. This week, Intel launched an enhanced Pentium that matches the speed of the first PowerPC chip. Intel's third-generation Pentium, the P6, will be out next year, ahead of schedule. And Intel will continue slashing chip prices about 30% a year.
"We're paranoid," Intel's Nichols says. "We're going to have to work harder."
Microsoft is developing the next version of Windows, due later this year. Apple will counter those attacks with an updated version of its Macintosh operating software. And Motorola promises more powerful PowerPC chips this year.
Who will prevail? Ultimately, PC buyers will decide. Intel's Nichols says: " Apple lives or dies with this one . . . ."
Bruised but not beaten Apple hopes the Power Mac will reverse its earnings slide. In millions: 1990: $ 475 1991: $ 310 1992: $ 530 1993: $ 87 1994: $ 200 (est.)
Power PC chips Different chips are planned, for different uses: Type Available
Key uses 601 now
Macs and IBM PCs this year 603 mid-1994
Portable PCs, desktops 604 late 1994
Replaces 601 620 late 1995
Sophisticated computers used
by engineers and scientists Sources: Apple, Motorola, Zack's Investment Research
