PALO ALTO, CALIF. -- John Sculley is on a roll.

Bishop Auditorium at the Stanford University School of Business Administration is packed. People are standing in the aisles and spilling out the doors to hear the chairman of Apple Computer Inc.

Sculley is regaling the crowd with tales of Apple and showing the company's famous television commercials to punctuate his points. Often he is interrupted by applause or laughter.

"Apple is a very different company," he says. "Apple makes some big promises to people when you join it. One promise is that you're going to personally be able to make a difference. Another is that you're going to be a part of an adventure to change the world. Another is that you're going to get a chance to learn from that experience."

Not long ago, the person at the lectern saying these things would have been Steve Jobs, Apple's charismatic and visionary cofounder. But Jobs is gone from the company now, the loser two years ago of a power struggle with the more reserved and conservative Sculley, the former PepsiCo Inc. executive whom Jobs had hired to be his mentor.

Today, Cupertino, Calif.-based Apple is a resounding success story, one of the few bright spots in struggling Silicon Valley. But the company has gone through wrenching changes in the past two years. Indeed, the topic of Sculley's speech is, "Managing in a Crisis."

Shortly after Jobs' ouster, Apple posted the first -- and only -- quarterly loss in its history. Twenty percent of the people hired to make a difference and change the world found themselves laid off. And there were whispers that Apple -- the company that Jobs and Steve Wozniak had started eight years earlier in a garage, the company that accelerated from zero to $1 billion in seven quick years, the company that became a symbol of the entrepreneurial spirit of Silicon Valley -- was not going to make it.

"Many people were writing that Apple's heart had been ripped out, that we were a whale lying on the beach with no future, that Apple wouldn't make it until the end of 1985," Sculley tells the hushed Stanford audience. "The big question on people's minds . . . was, 'Where are we going? Is there any future? With the founders gone, was the company going to no longer have a vision? Would we no longer create innovative products? Were we going to go into the soft-drink business?' "

No. But what the former soft-drink executive did was take Apple into the heart of Corporate America.

With Jobs in exile, 48-year-old John Sculley has remade Apple Computer -- some would say in his own button-down image. It still has much of its brash elan that made it a legend of corporate counterculture: The average age of its employes still is less than 30, the dress code remains informal, popcorn machines are as much office fixtures as water coolers, and the Friday afternoon beer busts continue unabated.

But Apple in the past two years has been drastically refocused. Where Jobs wanted to sell computers "for the rest of us," Apple now is targeting Fortune 500 customers. The home computer market Jobs envisioned is dismissed by Apple's current leaders as a pipe dream.

And the quirky technological individuality of Apple's computers, which once were only compatible and connectible with each other, has given way to a new philosophy that Apple's machines, while still unique, should be able to communicate with all the other computers out there, even -- and especially -- those made by once-scorned rival International Business Machines Corp.

Many people inside and outside Apple say it has matured in the past two years. Yet even as the company has been changed, Sculley has struggled to hang on to the culture and vision that made Apple unusual -- and has done so successfully, by most accounts.

"Apple's cultures and values really require that we find a way to manage through a crisis, but do it without violating the basic values of the company," Sculley said. "If we did something to violate those roots, then I felt that was far worse than how much money we lost, or errors in strategy, or things like that, because it wasn't clear to me there was going to be another Apple Computer."

By almost any measure, Apple's transformation has been a success. The company earned $154 million in the fiscal year ended last Sept. 30 on sales of $1.9 billion, and both figures are expected to improve significantly this year. Apple recently declared its first stock dividend -- a rarity in Silicon Valley -- and split its shares 2-for-1.

Apple's Macintosh computer, once dismissed by critics as an underpowered toy, finally has found a home in the business world as the result of technological improvements, better marketing and the success of desk-top publishing -- the use of a personal computer to produce slick graphic presentations and reports at a fraction of the cost of having them done by design firms. Desk-top publishing is credited as the Trojan horse that got the Macintosh into corporations that previously had shunned it.

And Apple has been paid perhaps the biggest compliment of all by arch-rival IBM, whose new personal computer system adopts many of the easy-to-use features of the Macintosh, as well as its graphics capabilities.

While the rest of the industry is scrambling to adjust to IBM's new machines, which were announced in April, Apple's leaders see the imitation as flattery, rather than as a threat -- and they claim that it will be 18 months before IBM's new system catches up to where Macintosh is now.

All of this has again made Apple a darling of Wall Street. Its stock, after bottoming out following the ouster of Jobs, has skyrocketed in the past year. Sculley points out to the Stanford audience that the total market value of Apple stock, which stood at $900 million two years ago, now is well in excess of $5 billion.

"Not bad for a company that was in a garage 10 years ago," he says. The business-school crowd goes wild.

Apple effectively created the personal computer industry a decade ago when it introduced the first crude Apple II computer kit. What started out as a small hobbyists' business rapidly and dramatically evolved into a multibillion-dollar industry. The personal computer has become ubiquitous in business and a staple of education, making computing power undreamed of 10 years ago easily and widely available.

Apple is both the industry's pioneer and survivor. Over the years, countless other small computer companies have started, flared briefly and disappeared. And with the introduction of the landmark IBM PC six years ago, the personal computer industry turned into big game.

The PC and the IBM name made the personal computer a commonplace tool, and IBM PCs, or PC "clones" made by other manufacturers, account for the biggest share of the 32 million personal computers in the United States. Although IBM's machines and their MS-DOS operating system became the industry standard, Apple resolutely went against the grain. Led by Jobs, the company clung to its own noncompatible hardware and software systems.

The best example of this was the Macintosh, released with much fanfare in early 1984. It was like no other small computer. Its "graphic interface," in which a user operated the computer by using a handheld "mouse" to point at icons on the screen, was, while easy to use, like nothing else on the market -- and deliberately incompatible with the IBM system.

Unlike most other personal computers, the Macintosh was a "closed" machine -- owners could not get inside to modify it to their needs. Even the 3 1/2-inch memory disks used by the Macintosh were singular; virtually everybody else in the industry was using 5 1/4-inch disks. Programs written for the Macintosh couldn't run on anything else, even the Apple II -- and vice versa.

The Macintosh was a perfect symbol of Apple's iconoclasm. Jobs saw Apple as a renegade company, and that spirit even extended to internal matters. Jobs flew a pirate's skull and crossbones flag over the Silicon Valley building in which he and a group of hand-picked engineers were developing the Macintosh. Once the Mac was introduced, Jobs produced and marketed it in a division completely distinct from the division that made and sold the company's other computer, the Apple II. The split so frustrated Jobs' cofounder, Wozniak, that he left the company in early 1985 (he since has returned as a consultant).

By then, Sculley was on board as president, hired by Jobs and Wozniak to give Apple some cachet as a responsible, adult company in its largely fruitless efforts to sell computers to the vast business market that was ignoring Apple.

He signed on to what at first appeared to be the hottest company in American business. "Spirits were really high in 1984," Sculley said, remembering the initial flush of good feeling. "We didn't think we could do anything wrong. The industry was booming. We didn't know how high up was."

Then the personal computer business collapsed.

IBM, by then the industry leader, cut prices to stoke sales, and Apple couldn't keep up. Worse, the Macintosh, only a year old, stopped selling. Although an artistic success, the Mac had been judged too underpowered to be of value to the serious business computer user. Promised products to connect Macintoshes to one another to form the heavily advertised "Macintosh Office" never materialized.

"We wanted to enter the office market, but we were very naive about it," Sculley said. "What we managed to do was to confirm, in the minds of a lot of people, that Apple was a bunch of crazies."

In May 1985, Sculley moved to take over. He pushed through a reorganization of the company that united its two divisions, reduced redundancy and effectively removed Jobs from day-to-day control.

Jobs was relegated to a minor position in the company's hierarchy; a few months later he left Apple to start his own firm, Next Inc., which is developing high-powered computer workstations for the university market. Jobs declines to talk about his Apple experiences.

In the months following the reorganization, Apple changed profoundly. "The thing that John did, that Steve could never do, was to unite the company," said Regis McKenna, the Silicon Valley public relations and marketing expert who has had Apple as a client from the beginning.

In addition to bringing together the two sides of the company, Sculley retargeted Apple's high-powered marketing pitch. Crucial to that was the concession that the home computer market, long the Holy Grail for Apple, didn't exist.

"The home market has never turned out to be a real market," Sculley said. "People couldn't figure out what to do. Balancing their checkbooks and keeping track of their recipes wasn't enough to justify learning how to use the personal computer."

If the computer was going to be used in the home, Apple concluded, it would be used as an educational or business tool. And those were the markets the company wanted to be in.

The education market was a logical choice: Apple has been prominent in it for years, reaping the benefits of seeding thousands of free or discounted Apple IIs in schools around the country. Students who used the machine went home asking for one of their own, and the Apple II, with a huge base of software, became the standard for the education market. Four million Apple IIs have been sold.

The business market was more problematic. With a few exceptions, Apple long had been unable to get its machines into big companies and government agencies, principally because of marketing and technology failures. The Apple II was never even developed as a business computer. The company had struck out with its flawed Apple III and Lisa computers before the Macintosh was found wanting as a business machine.

But if you're going to make money selling computers, you've got to find customers in business and the government. "The reason we wanted to replace home with business was very simple," Sculley said. "It's like what Willie Sutton said bing banks -- that's where the money is. It's the largest part of the market; it's growing the fastest."

Apple's weapon was an upgraded version of the Macintosh, the Macintosh Plus, introduced in early 1986. The Mac Plus had expanded memory, a faster operating speed and more ability to expand or connect to other computers.

But Apple also had to convince potential customers that it could be a significant, reliable player in the business market. "We found that business doesn't care how innovative the products were if they didn't trust the company," Sculley said. "So that was really the first step. And we did that by demonstrating that we were financially strong."

Apple bounced back from its $17.2 million loss in the third quarter of fiscal 1986 with a profit in the next quarter.

The company also got a huge break. Steve Jobs had envisioned desk-top publishing as a market for the Macintosh all along. From its introduction, Apple had stressed the computer's ability to turn out high-quality graphics easily and cheaply.

In 1986, the market exploded. The introduction of new types of software and relatively inexpensive laser printers by Apple and others made it possible to turn out newsletters, presentation graphics and well-illustrated reports on the Macintosh that rivaled the quality of work done in professional print shops. Practically overnight, desk-top publishing became a $1 billion-plus industry, and Apple had the biggest share of it.

"We didn't invent electronic publishing; it had been around for a long time at the high end of the industry," Sculley said. "All we did was to bring it down to the domain of the under-$10,000 work station user."

"People have said that was our Trojan horse into business," said John Zeissler, until recently Apple's manager of business marketing and now vice president at the company's recently formed software subsidiary. "I think desk-top publishing was critical to our success in business. . . . It demonstrated to the world that you could do things on a Macintosh that you couldn't do in other environments."

Suddenly, the Macintosh was in demand, fueled by the introduction of the Macintosh Plus. Macintosh sales doubled in 1986 from the year before. Zeissler said 1986 "was a real turning point for us in gaining credibility in the marketplace . . . I think we're being invited back into a number of organizations where the door had been slammed in our face in the past."

"In fairness, it takes time for a revolutionary idea to really jell and be appreciated," Sculley said. "Many of the ideas which Steve Jobs had with the original Macintosh weren't wrong. It just took time for people to understand that the Macintosh really was a great product, and it was a great product when it was first introduced, even though it was limited in functionality and power -- but the basic ideas were right."

Apple's share of the business market still is relatively small next to the IBM PC and its clones. But the company likes what it sees. IBM's announcement in April that it would scrap its existing PC design and MS-DOS operating system and introduce a new line of computers that operate much like the Macintosh was the cause of great glee at Apple.

Apple's leaders respect IBM's muscle. They know how quickly the original PC design came to dominate the personal computer market, and how brief any window of opportunity over IBM can be. But Apple believes it has an 18-month lead.

"They can ship the products, but they don't have the software that can let them do the things that we can do now," Sculley said. "If people want to be able to do the kinds of things {on an IBM} that we can do on a Macintosh in 1987, you're probably talking about 1989. If you're talking about doing the kinds of things we'll be doing a year or so from now, then you have to push that further out."

To maintain its edge, Apple will have to keep advancing the technology. A group of new Macintoshes introduced shortly before the IBM announcement provides a hint of where Apple is headed. They include an even more powerful version of the basic Macintosh, the SE model, and a machine that represents an even greater departure: the Macintosh II.

The Mac II all but obliterates the criticism leveled against even the most powerful Macintosh. It has a bigger screen, operates in color, can run programs in MS-DOS and the other industry standard, Unix, and allows an owner access to its innards for modifications and customization -- an "open" machine.

Apple is pushing the Macintosh II hard with the business community, selling it as a machine that can be dropped into any computer network and be compatible with existing machines and software. "It's just the beginning of the Macintosh," said Delbert W. Yocam, Apple's executive vice president and chief operating officer. "I almost look at it as {if} our first decade we had the Apple II, and our second decade we're starting out with the Macintosh II."

As a result of the company's reorganization and financial strength, Apple's leaders believe the company now is better able to keep a stream of new products flowing to the marketplace.

"In the past, Apple went from product to product, so we would pour our hearts and souls into building a great product, and then everyone would collapse of exhaustion," Sculley said. "Then it would take us two years to get the next product out, if we were lucky. Now we're introducing multiple products in the same year, and we have the pipeline filled with other products for future years, and we've got lots of different technologies that we're working on."

You could say that Apple is growing up. It may not be an adult yet -- what 10-year-old is? But as Zeissler said, "Apple is moving out of the adolescent stage of our existence. For a company that's only 10 years old, we still have to have some pimples. I can't wait until we get our driver's license."

"Apple had to grow up," Sculley said. "And I think it's come a long way."

MONDAY in Washington Business: Apple pushes sales to the government.