‘We don’t believe it all revolves around a PC-centric view of things’

In many ways, Apple Computer proves the point that both Sony’s Sommer and Intel’s Grove have made about convergence being driven by market hunger (see 3–4). But while Sommer’s and Grove’s appetites lean toward expanding their existing customer bases (albeit in Sommer’s case with new product types), Apple has taken the more daring tack of launching into a whole new market segment.

On the road to find out. Apple chairman John Sculley believes the first most important event of the last year was the “broad acknowledgment, at least by most of us, that there is a new mega-industry emerging,” based on digital technology in consumer electronics, computing and media publishing.

The second most important event was the rapid advancement in telecommunications technology that is allowing exponential leaps in the capacity for information to move across networks. By the early 21st century, Sculley believes that network capacity will have increased 10,000-fold — and the result will be “a very different world.”

Pervasive networking. So important is pervasive telecommunications to Apple’s participation in the new mega-industry, in fact, that Sculley says almost all of Apple’s multimillion-dollar research and development budget is linked into communications. Networking is already a core feature for the enormously successful PowerBook product line, as well for as the upcoming Newton line of personal digital assistants or PDAs. All Newton devices will be equipped with sophisticated communication links between devices as well as to local area, telephone, cable, satellite and mobile networks — and on a global level, too.

A MEGA-INDUSTRY METAPHOR

The reason the mega-industry is forming, says Sculley, is that both the consumer electronics and the computer businesses have become commodities. Neither industry is making much money at what it does, and both can see how their family trees are growing together as a result of smaller, cheaper and vastly more powerful electronic components.

So where once it was a boon to have a fierce and incompatible competitor, much industry talk has shifted to strategic alliances. Sculley believes they are vital to any company that wants to move past the “commodity” trap.

Thus, Apple, long the revolutionary renegade, wants to license its PDA technology and is tightly partnered with former arch-rival IBM, as well as Sony, Motorola, Random House and Pacific Bell. It formed Kaleida, its joint venture with IBM, to standardize multimedia software formats and license QuickTime (Apple’s most successful new technology since the introduction of the Macintosh in 1984) for use on other computer platforms. With Toshiba, it hopes to create a successful home multimedia player, and with Sharp, a more useful Wizard-style device.

In response to our questions, Sculley admitted that he would like Apple to become an information provider, or “publisher,” as well as a supplier of devices and technology: “It’s not likely we’ll necessarily own the content, but there will be a real need to be converters of content in digital form, a real need to distribute the content to whatever services that can come out of publishing and distributing content,” he said. “The place we would start is with people who are good at the things we aren’t.”

Not for the faint of heart. It’s a strategy that’s not for the faint of heart. But as Sculley has said on many occasions, Apple really had no other choice. With its traditional PC market already viciously commoditized, a move into personal and consumer electronics — and the binding together of these devices with computers in a digital world — was the only real alternative to shutting down the factories and getting out of the hardware business altogether.

Sculley sees great potential in the market for interactive devices and consumer electronics. Disagreeing with Grove, he said, “We don’t believe that all of this revolves around a PC-centric view of things. Clearly we think there’s a great role for personal computers in all of this, but there’s clearly something much, much bigger than this occurring.”

Thus Apple will continue parallel product development in both the company’s personal electronics division and its traditional business market. “It doesn’t make sense for Apple to jump from one commodity [business computers] to another [consumer electronics],” says Sculley. “But for us to ignore consumer electronics and just focus on business will really slow down the process to get these personalized, professional systems really in place.”

Denise Caruso