APPLE, which in the past has often given away its most valuable software, is embarking on a new software strategy as it seeks to reverse a string of losses and rebuild.
Gilbert Amelio, Apple's chairman since February, says he is working to update the business model for Apple, which he says is still stuck in a 1984 mindset (the year Apple launched the Macintosh).
Amelio also says the troubled computer maker's restructuring is on schedule and that his biggest accomplishment so far has been "that we survived".
"I think we've got a hell of a lot done in the past eight months," says Amelio, who was brought in by Apple's board to turn around the ailing computer maker.
And he expects the computer maker to report a profit for its fiscal second quarter that ends in March 1997. "I have no reason to believe we won't do that," he says.
Part of Amelio's strategy has been focusing on what Apple does best, which is to develop an easy to use computer "for the rest of us". It was Apple's treasured operating system that for years made the Mac easier to use than other PCs, before Windows took off.
"In the beginning, customers valued hardware, so that's what they wanted to pay for," Amelio says. "Over time, customers' perception has shifted to where their view of hardware is pretty much as a commodity . . . and that the value is in other stuff but we don't charge for the other stuff."
Amelio says Apple plans to sell customers incremental releases of its operating system, where users can update their programs as needed.
This so called "modular release" of select pieces of its operating system and other software will generate a new source of revenue. Software could account for as much as half of total revenues in about five years. Amelio says.
Apple currently doesn't split its revenues between hardware and software, because its software, such as its much vaunted Macintosh operating system, is bundled free with each Mac as is its acclaimed QuickTime video playback software.
Apple will begin the new strategy in January, when it releases part of an upgrade to its current 7.5 version of the Mac operating system, code named Harmony. The modular software upgrade will hopefully stave off users who have been waiting for Apple's Copland, the long delayed revamp of the Mac operating system (see Computimes, October 7th).
Amelio says Apple is still working on fixing the core "plumbing", the foundation layer of Copland, but he won't give any time frame on when or how it will be released.
Amelio says the strategy for revamping the foundation of Copland will include making it compatible with its other Macintosh applications. He says the model is somewhat analogous to Netscape Communications' use of "plug ins" for its Navigator browser software, where users can download software additions. For example, users can add new software to the browser to allow long distance calling over the Internet.
Amelio says he expects these new software products to be highly profitable, but declines to be more specific.
"We have to get a certain price for the business model to make sense," he says, adding that Apple will probably continue to bundle the core operating system free with the hardware, but users will pay for any new features they want.
Despite being popular with some users, Apple machines have been losing out to competitors and the California based company has been hit by heavy losses. It lost $32 million (IR£20 million) in its third quarter after reporting a record $740 million loss in the second quarter, which included one time charges for its massive restructuring programme.