Almost Down To The Core?by
Market share is up at last, and the rumored takeover bids haven't materialized. Still, something is seriously amiss at Apple Computer Inc. In recent weeks, the personal-computer maker has suffered the worst exodus of top executive talent since John Sculley was ousted as CEO two years ago. And some of those remaining are questioning the company's ability to reverse a yearlong slide. Says one: "With the current cast of characters, it won't get fixed."
There surely are holes in Apple's infield. Chief Financial Officer Joseph A. Graziano announced his resignation on Oct. 2 over a dispute with CEO Michael H. Spindler. David Willcocks, vice-president for enterprise and government marketing, followed on Oct. 30. Three days later, worldwide marketing chief Daniel L. Eilers found himself out of a job, following a Spindler-devised reorganization. And Dave S. Manovich, vice-president for consumer retail sales, departed on Nov. 7.
"SERIOUS LOSS." The talent flight, especially that of Eilers, leaves Spindler with no clear No.2--and little operations expertise near the helm to complement his skills as a strategist and marketing expert. "Eilers is a serious loss; he understands the culture better than anyone," says Apple watcher Tim Bajarin of Creative Strategies Inc. While Eilers himself says the restructuring "is what is best for Apple," the vacuum is more than evident to other executives: At a two-hour meeting in late October, a small group of sales and marketing managers urged Spindler to hire a chief operating officer to handle daily duties. "My view is he needs help to run the company," says one executive.
Spindler, who declined to be interviewed, has hired Russell Reynolds Associates Inc. to find a new CFO, according to another recruiter who bid for the work. But he has no plans, say insiders, to reestablish a COO slot--the position he held before replacing Sculley in 1993. A new CFO alone may not give Apple the management depth it needs. "Apple's in the unfortunate position of having to increase market share and profits at the same time," says Hambrecht & Quist analyst Todd Baker. "You need a deep, experienced team to get through times like this."
In some ways, Apple is past the worst. With demand high for its Macintosh computers, it faces a golden opportunity to slow the momentum of Microsoft Corp.'s Windows 95. It already appears to be putting a dent in its $1 billion order backlog. The parts shortages that have dogged the company are easing, and it finished the September quarter with $600 million in finished PC inventory, in position to take advantage of the holiday rush. Alex. Brown & Sons Inc. analyst Phillip C. Rueppel forecasts Apple's Christmas quarter sales of $3.3 billion, vs. $2.5 billion a year ago.
Spindler's 1996 goal: to gain an additional percentage point of share in the hard-fought U.S. market, by focusing more on the home PC market and on Apple's traditional strongholds in media applications. But that's not the drastic action Wall Street is looking for. The stock market was clearly amenable to rumors of a possible takeover by Hewlett-Packard Co. on Nov. 7: The gossip drove Apple's share up 10% in two days, to 39 5/8. Sanford C. Bernstein & Co. analyst Vadim Zlotnikov thinks the stock could hit 50 if Spindler sold off pieces of the business or created joint ventures for non-Mac products, such as the handheld Newton. "Given that Apple has already commercialized these products, now is a good time to start extracting their value," he says.
DISARRAY. With Spindler still clearly in control, though, that probably won't happen, insiders say. More likely, management turmoil will continue to spread through the ranks, including the company's coveted engineering corps. Already, key architects of the highly successful Power Mac line such as Jon M. Fitch, Gary G. Davidian, and Carl C. Hewitt have left. And many managers are growing tired of the disarray, says one headhunter who has found willing listeners within Apple. "Morale is not high for the top people--there's too many meetings and reorgs," he says. Adds an executive at Mac clonemaker Power Computing Corp.: "We've got a stack of resumes." Unless Spindler comes up with something to rally disillusioned Apple-ites, he may get plenty more.