Apple's Newton: The Start Of Something Big?

John Sculley is the CEO of the world's No. 2 personal-computer maker. But he confesses to being "a fax junkie." He has six of them--at the office, at his home in Woodside, Calif., at his summer retreat in Maine, even aboard his 50-foot yacht.

It was in the throes of his fax fixation that Sculley began to think about how simple and easy these machines are to use. Why not a pocket fax?

That was four years ago. Now, that idea has blossomed into Apple Computer Inc.'s first entry into the $33 billion consumer-electronics market. Apple is not talking much about the product prior to launching it on May 29, but details are leaking: Code-named Newton, this book-size device--six inches by eight inches--goes far beyond Sculley's original notion. Those who have seen it call it a "Sharp Wizard on steroids." No wonder: Sharp Electronics Corp. is designing the miniaturized hardware and providing key liquid-crystal display (LCD) technology. Sharp will build Newtons in Japan for Apple and has a license to use Apple software in its own Newton-like machines.

RUSTLING PAPER. The whole Newton package, says an insider, is "cool," but the sophisticated software is what stands out. There's no keyboard because, like other pen-based computers, Newton is programmed to recognize handwritten printing. It can also capture a digital "snapshot" of your writing, including sketches, which then can be transmitted like a fax page.

But Newton's most impressive programming makes it an "intelligent assistant." It understands certain key words so you can, for example, dash off a memo and dispatch it by simply printing on top: "Fax John Sculley." Done. And data from the office can be whisked to Newton anywhere, via a cellular modem. Apple adds some nice human touches, too: As you flip through the electronic address book, you hear pages turning.

Sounds good--especially in a world of clone computers and tired consumer gizmos. "It's the most exciting product I've seen in eight years," says one Silicon Valley analyst who previewed it.

But Newton is just a prototype now. A lot could change before shipment in January--including the price. Apple only says it will be under $1,000, but insiders say the target is $700. And by next winter, there may be more competition. Casio Computer Ltd., whose Boss line pioneered the electronic-organizer market, is planning a souped-up model for just $299. And Hewlett-Packard Co. is adding handwriting-recognition to its popular $700 95LX "palmtop" PC. That's expected by February, giving Apple only a month's headstart over a seasoned competitor.

Apple appreciates the difficulty. That's why it's passing off manufacturing to Sharp and using Sharp's connections to help get Newton into such consumer-electronics retailers as Best Buy Co. and Circuit City Stores Inc. Internally, Apple Chief Financial Officer Joseph A. Graziano is slashing costs so earnings won't get creamed when Apple enters consumer electronics. He says he has even raised prices at employee cafeterias.

ANSWER BOX. Sculley says Newton is only the first in a planned series of "personal digital assistants." The ultimate PDA is the Knowledge Navigator, a nonexistent product that Sculley outlines in a clever animated film. In it, the machine responds to any spoken command, from "Call my mother" to "What was the average rainfall in the Amazon Basin for the last 10 years?"

That pie-in-the-sky hype has inspired skepticism and some ridicule. But if Newton delivers just a bit of Knowledge Navigator's capabilities, Apple could really start something in consumer electronics. If not, it's back to the fax machines for Sculley.

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