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January 2, 1997updated 05 Sep 2016 1:08pm

APPLE TAKES HIGH RISK NEXTSTEP TO SECURING ITS FUTURE

By CBR Staff Writer

In the end, Jean-Louis Gassee’s demand for a tenth of the enlarged company and a seat on the board proved too much for Gilbert Amelio and EllenHancock, and once the latter had assured the former that NeXTstep contained everything Apple Computer Inc needed to get a true multitasking 32-bit operating system off the ground, Be Inc got the brush off, and, just before Christmas, Apple tied the knot with its co-founder. Rather than shares, it is paying about $400m in cash for Steve Jobs’ NeXT Software Inc and gets Jobs as a part-time consultant. The price paid over is $350m, mostly in cash but with some shares, but Apple will also pay off NeXT’s $50m of debt. Jobs is clearly selling because NeXT is not his only iron in the fire, and the company was clearly going nowhere. The price is still a very rich one, because Fred Anderson, Apple’s chief financial officer, expects NeXT to report only about $50m in sales for 1996 – and that after 10 years in business, although he says that in the quarter ending December 31, NeXT will show a break-even result and will be profitable in the March quarter. But Apple will have to take a $300m charge in its current – fiscal second – quarter to March 31 to write off in-process research and development. The task ahead of Apple remains an enormous one – to start with, there is not even a finished version of NeXTstep for the PowerPC, and Apple can hardly afford to switch processors again at this stage in the game – and its decision to keep alive and harmonize the iAPX-86 version of NeXTstep could prove a two-edged sword.

A strategic mess on its hand with $400m less

Analysts say that while the pact will give it a much-needed operating system, the deal might still not be enough to boost its market share or bottom line. (The move) has a lot of PR value, but it looks to me that the company still has a strategic mess on its hand with $400m less, John Rossi, an analyst at San Francisco broker Robertson Stephens & Co told Ieuter? There is a widespread p er ception that w h ilee the already ageing NeXT operating system helps Apple make up for lost time and provides the foundations for a new operating system, the technology is not dazzling enough to set the Macintosh apart from computers running Windows, and the market reaction was less than fullsome – the original Los Angeles Times story, which was hazy on the details of the deal ahead of its announcement, was good for $1.25 on the share price at $23.50, but Apple shares rose only another 12.5 cents to $23.625 after the deal was announced. The fact that Jobs is coming back – albeit only part time and with a wishy washy title – is expected to work wonders for morale inside Apple at first, but the hard part comes when he has to deliver. He is seen as the only person who can inspire Apple’s demoralized programmers to create an operating system to put Microsoft Corp and Windows in their place. He will help tremendously, said Randy Wigginton, a former Apple programmer who worked under Jobs to write the software of the original Mac. Steve is incredibly bright, talented, amusing. Jobs’ visionary role and Hancock’s strict, no-nonsense management style balance nicely, reckons Tim Bajarin, analyst at market researcher Creative Strategies Research. Everybody is excited, said an Apple employee close to the project. I am very excited. As for Jobs, I feel very lucky to be a part-time Apple employee and work for Gil and advise him on product strategy, he said – but half his time is to be spent with his other major venture, the motion picture graphics and animation specialist Pixar Animation Studios Inc. Apple is scheduled to give much more detail of its plans at MacWorld in San Francisco on January 7, although it will likely take months for the true nature of the planned product to become clear. At all events, Apple has effectively burned its boats, because by buying NeXT, it has effectively advised developers that Macintosh System 7 is dead..

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