Some people accuse me of writing too much about Apple Computer. I don't think that's true (especially since I'm also going to write about Lotus), but, hey, Apple is an interesting company. The Apple folks are wriggling around like a worm on a hot brick as they try to deal with some fundamental questions about their company's future.
President and Chief Executive Officer John Sculley (a.k.a. The Man from PepsiCo) has his work cut out for him. He's told analysts publicly that the company is preparing for a period of slower sales, and he's made moves to cut costs. The company has shut down production plants and laid off workers. The Macintosh hasn't sold as quickly as expected, and the competition for business customers against IBM and Wang has been tough going. Apple is not the supernova of Silicon Valley this year.
What can Apple do to rekindle some heat?
Here's one scenario that is now a hot topic at Apple, according to sources inside the company: Cut the price of the 128K Macintosh to well under $1,000 and market it aggressively as a home computer.
Yes, I know the home computer market has been something less than spectacular recently, but high-end systems did very well this past Christmas. What's more, the 128K Macintosh is the kind of easy-to-use consumer appliance that might turn into an impulse buy if the price were right. Side by side with a Commodore 64 or an IBM PCjr or even Apple's own IIc, the Macintosh is clearly an intriguing alternative.
Since its introduction last year, the cost of building Macs has shrunk dramatically as chip prices have shrivelled and as the company has gone down the appropriate manufacturing learning curves. I bet the 128K Mac could be priced at $800 and still offer Apple a decent margin. Obviously, the retailers would love something they could sell in high volume.
What's the catch? One problem that screams like a banshee in the night is the fact that Apple is desperately trying to position the Mac as a business machine -- a.k.a. The Macintosh Office. Opponents of the "Cheap Mac" concept fear that a low-priced consumer Mac would taint the machine in the eyes of the business community (even though the 128K Mac is virtually useless as a business machine; serious business users buy the 512K Fat Mac. Consequently, the 128K Mac would be unlikely to eat into business sales.)
But how do you get around the image problem of Macintosh as toy? How do you market both a business and consumer verison of the Mac?
I don't know. I think this is one of the key questions that will determine whether John Sculley is worth his salary. Clearly, Apple has a brilliant opportunity to position itself in the consumer market. Mac software now exists in some quantity. What's more, a proliferation of Macs leads to more software. More software increases the chances of programs that might be useful in the business market -- which, in turn, would give Mac's office aspirations a boost. Is this idea risky? You bet. Might it be worth the risk? That's a question that will haunt Apple throughout this year of cutbacks and consolidation.
Writing of risks, pay attention to Lotus Development Corp.'s recent acquisition of Dataspeed, a San Mateo, Calif., company that uses radio frequencies to distribute information (particularly stock quotes) to personal computers. The company has developed a device called a "modio" -- part modem, part radio -- that can pick up specially encoded radio signals and shove them into the computer. Lotus, very cleverly, recognizes that information, software and communications are all part of the same industry. The Dataspeed acquisition puts Lotus in a position to create an information network that distributes data to personal computers running Lotus 1-2-3 or Symphony software programs. This is one way to "add value" the software. It's also a way to ease into a new market: i.e., information distribution.
Don't think this idea is all that new. Dow Jones has been distributing data to personal computers for years. Publishing giant McGraw-Hill also is doing it. Can the $250 million-a-year Lotus transform itself from a software publisher to an information provider as well? Who knows? It's a low-cost, high-risk acquisition. But it does demonstrate that Lotus is willing to take a chance to grow a new market opportunity into a viable business.