Apple edges out of the doldrums with a little help from its old enemy

"Think profit." The giant letters on the wall-sized screen behind Mr Steve Jobs, Apple Computer's acting chief executive officer, summed up the overall tone of the world's largest Macintosh computer event, MacWorld Expo in San Francisco this week. Subdued, with a sense of low-key optimism.

A play on the slogan in Apple's current "Think different" advertising campaign, the words flashed onto the screen as Mr Jobs concluded his keynote speech on Tuesday morning. With mock nonchalance ("Oh, I almost forgot?"), he announced to the gathered thousands in the Marriott Hotel ballroom that Apple had turned a profit last quarter and a rather decent one, at $45 million (£32.6 million) on an estimated $1.6 billion (£1.15 billion) in revenue.

According to Mr Fred Anderson, Apple's chief financial officer: "We had stable revenues and improved gross margins. That's how it was done."

Analysts had been predicting a loss of about $10 million, or six cents a share. In comparison, during the same quarter last year Apple posted revenue of $2.1 billion and a net loss of $120 million, or 96 cents a share. The company has not had a profitable quarter since the summer of 1996, and has lost $1.8 billion over the last two years.

Nonetheless, the user-friendly Macintosh has retained a loyal following, estimated at some 70 million users. About 70,000 of them converge on San Francisco each year in January for MacWorld Expo.

As the Mac's fortunes have slid at one point in the 1980s, it seemed that the Macintosh would become the dominant computer operating system, a position now held by Microsoft's Windows the Expo has become a chance for the so-called "Mac Faithful" to gather, see new Mac hardware and software, and latterly, commiserate.

They were out in strength for Mr Jobs's keynote, forming a queue several people thick which snaked onto the pavement and around the block.

The charismatic and enigmatic Mr Jobs co-founded Apple with Mr Steve Wozniak in the late 1970s before being jettisoned for his mercurial ruling style by Apple's board of directors. Former CEO, Dr Gil Amelio, dramatically brought Mr Jobs back to the fold in December 1996.

Mr Jobs's speech was much-anticipated by the Expo attendees, even though it was widely understood that he would neither announce a candidate for Apple CEO a position which has remained vacant since Mr Jobs himself ousted Dr Amelio last summer nor unveil the muchrumoured Macintosh network computer.

The Mac NC, a small-memory device which would link to the Internet and connect to a larger "server" to access software applications, is expected in the spring, according to an Apple source.

Mr Jobs's speech focused on Apple's strategies to turn around the ailing company, and included several new product and technology announcements. At the top of the list was Apple's emphasis on its new high-performance G3-line computers, which aim to compete with Intel Pentium II machines. With 133,000 G3s sold in 51 days, Mr Jobs said demand has already outstripped internal company predictions for 80,000 in sales.

Apple has also begun to work pro-actively with its resellers. A November deal with computer chain CompUSA is already bearing fruit. Large all-Apple sections, which Mr Jobs called a "store within a store", have been established in 57 CompUSA outlets. Apple sales jumped from 3 per cent of total computer sales in October to 14 per cent in the specially-outfitted stores in December.

The most significant software announcement was Microsoft's introduction of Office 98, which is currently only available for the Mac. Although any mention of the former premier Apple rival traditionally draws some hisses and boos from MacWorld audiences, Mr Jobs formally buried the hatchet last summer when he unexpectedly announced a partnership with Microsoft.

This time around, Microsoft ended up getting the longest applause given any guest presenter. Mr Ben Waldman, Microsoft's Macintosh business unit general manager, had the unenviable job of wooing a frosty audience.

He took a direct approach, admitting that Microsoft had got its Mac products all wrong in the past by forcing a Windows-like interface onto the Mac, when Mac users wanted a Mac environment. "Finally, we understand," he said. Office 98 was built specifically for the Mac, rather than being ported, or rewritten, from Windows, and the audience clearly liked its new features, some of them only available in the Mac version.

Mr Jobs also announced a software partnership with database company Oracle Corporation; improvements to its QuickTime multimedia software, which now can handle streaming video and audio; and the introduction of MacOS 8.1, an upgrade to the Macintosh operating system.

In the exhibition halls following Mr Jobs's speech, the atmosphere was quieter than in past years. Many areas of the exhibition floor which were filled by exhibitors last year were simply curtained off this year.

Especially conspicuous by its absence was the most prominent of the Mac clonemakers, PowerComputing, which had always been a brash and colourful exhibitor. Last year, in particular, when PowerComputing arrived with military vehicles, salespeople in camouflage attire and banners with slogans like "Fight back for the Mac", many onlookers felt PowerComputing was staging the marketing battle for the Mac which a limp Apple had surrendered.

However, Mr Jobs felt that lower-priced (and often higher-performance) Mac clones were eating into Apple's dwindling margins, and he bought out PowerComputing last autumn. Critics fear the loss of the clonemakers will hasten a fall in the Mac's market share, while Mr Jobs hopes consumers will opt instead for an Apple.

According to an Apple source close to Mr Jobs, one of the interim CEO's goals this week was simply to give the event a calmer profile. In the past years of corporate turmoil, Apple watchers have come to expect major announcements and sweeping statements of intent from Apple at the San Francisco Expo.

Mr Jobs would prefer for the event to be like other computer occasions a week when computer users can network and find out about new developments, and developers and vendors can show their wares.

Mr Jobs's restrained speech, backed by encouraging financial results, will help him in that goal.