Apple Blossoms

Apple Computer's Macintosh model, which came on the market one year ago, took off faster than any other personal computer since the launch of IBM's PC in 1981. Apple so far has sold more than 275,000 Macintoshes. The company, the symbol of U.S. entrepreneurial innovation, saw profits in the first quarter of fiscal 1985 zoom to $46.1 million, an eightfold gain from the same period in 1984. Yet Macintosh (basic price: $2,195) and its maker have a serious handicap. Many Macintosh buyers have been Apple's characteristic flannel-shirt clientele--students, hackers and do-it-yourselfers--who make up only one-third of the $38 billion personalcomputer market. The largest part of sales go to corporate managers who still feel more at home with IBM's models.

Apple's attempts to push into IBM's domain have so far been costly failures. The Apple III in 1980 was plagued by bugs. The Lisa in 1983 was considered too pricey at $10,000, about twice the cost of competing models. Apple hopes the business community will take more of a shine to the Macintosh. At the company's annual meeting last week, Chairman Steven Jobs and President John Sculley formally announced a campaign to sell corporate America on a new product line called the Macintosh Office. The core is AppleTalk, a system that will allow businesses to link as many as 32 Macintosh computers into an office network. Previously the Mac was basically a stand-alone machine. AppleTalk will cost just $50 per hookup, while connections in other computer networks can cost as much as $1,000. A key accessory will be the LaserWriter (price: $6,995), which can produce high-definition print-outs of charts and text.

The standard Macintosh held little promise as an office machine. Its 128K memory was too small to run complicated programs, and no real business software was available. But in September Apple began selling the so-called Fat Mac, a model with a memory expanded to 512K. In November came another breakthrough, when the developers of the bestselling Lotus 1-2-3 business program announced a version for the Macintosh, called Jazz.

The biggest barrier to Apple's office invasion will be IBM, whose army of sales and service personnel has fostered fierce devotion among most corporate computer users. Apple has always boasted about its better technology and never worked to make its machines compatible with Big Blue's. But in a shift last week Apple changed its strategy from Blue busting to detente with IBM. Conceding that many firms will rely partially on IBM equipment, Apple has decided it must coexist by devising both software and hardware adapters that will give its machines the ability to communicate with IBM's gear. "We recognize we have to adjust to IBM's world," said Sculley, "because they're not going to adjust to ours."

Apple's computer offers several advantages over IBM's models, including smaller size, better graphics and ease of use. Jobs believes the Mac will appeal to all sizes of corporations, from small shops to the FORTUNE 500. Indeed, current users include Federal Express, Heinz and Honeywell. Yet many potential buyers apparently became discouraged at how long it took Apple to beef up the Mac. In a survey last March by Personal Computing magazine, about 25% of subscribers who planned to buy a computer during the following year favored IBM, and about the same percentage wanted Apple. But in a repeat survey that will appear in the April issue, IBM's share rose to 30% and Apple's slipped to 19%. Apple will have to run hard to stay in the race with Big Blue.