Apple's Pippin: A Pip Or A Pipsqueak?

It lets a TV do a PC's work, but it may be too late

In his grim final days at Apple Computer Inc., former Chief Executive Michael H. Spindler took every opportunity to talk about Pippin, a technology that would be Apple's most aggressive move into consumer electronics. Based on a scaled-down version of the Macintosh operating system, Pippin would make possible gadgets to let the TV-viewing masses play Mac games and surf the Net from their couches. Even when Spindler was trying to calm the jitters of analysts who were spooked by Apple's sudden losses, he plugged the concept. "He talked about it like it would be the savior of the company," says CS First Boston Corp. analyst J. William Gurley.

The Pippin idea wasn't enough to save Spindler and in its first incarnation, seems unlikely to do much to alter Apple's fate, either. The first Pippin product, the $620 Atmark, was slated to start shipping in Japan on Mar. 22 from Bandai Co., the company that brought the world the Power Rangers. But at previews in the U.S. in early March, the system got a lukewarm response from software developers. Even if the Atmark lives up to Bandai's ambitious plans--Chief Executive Makoto Yamashina says the company will ship 500,000 units worldwide in the first year--Apple won't get much out of it. It receives royalties of $10 to $20 per machine and $1 per game disk.

The Atmark--the name comes from the symbol--bears the ill effects of Pippin's long gestation. It started in 1993 as a portable game machine, but the project languished, and Apple began looking for licensees for a TV-based unit in 1994. Bandai had planned to bring Atmark out in December but then, working with Apple, decided to wait until March so they could add Internet access. By adding a modem and Web-browsing software from Netscape Communications Corp., they figured Pippin also could serve as a cheap Web cruiser.

By the time the Atmark arrives in the U.S.--Bandai says it will by yearend--there may be lots of Net cruisers around. In late April, Oracle Systems Corp. CEO Lawrence J. Ellison says he will announce plans by some of the world's top consumer-electronics giants to build his Network Computer design. And Sega Enterprises Ltd. is poised to bring out a cybercruising game machine--under the Atmark price.

"MODEL OF THE FUTURE." The Atmark, which works like a CD player and looks like a cable box, is impressive enough. It lets TV viewers play games, run educational software, and surf the Net. But to keep the price low, Apple chose a 14.4-kbps modem rather than the speedier 28.8-kbps type. A keyboard is an extra-cost option. Another minus: Text remains tough to read on the tube--an obstacle for all TV-based Net surfing.

Pippin's real value may be in proving that Apple can be lean, mean, and entrepreneurial once more. Just 25 full-time Apple staffers work on the project. They are seeking electronics makers to sell Pippin technology in a variety of forms--embedded in high-tech TVs or as slick stereo components, for example. Target companies include Samsung Group and Mitsubishi Electric Corp., which already manufactures the Atmark for Bandai. "It's the business model of the future," says Apple Senior Vice-President Satjiv Chahil. Corporations could also use Pippin--to replace PCs in showrooms or training classes. TRW Inc. may buy 100 Atmarks to let employees look up benefits information.

For now, Apple has only Bandai. The $2.6 billion company says it will lay out its U.S. plans on May 15--including a $50 million budget to promote it in the U.S.--slightly more than Sony Corp.'s $40 million campaign for the PlayStation, which costs half as much and is attracting the hottest new games.

At Apple, new CEO Gilbert Amelio shares his predecessor's enthusiasm for Pippin. "Gil sees Pippin as a first step customers can take to become familiar with Apple technology," says Apple Senior Vice-President Steven Franzese. If not the first step to Apple's salvation.

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