December 30, 1996

Apple acquires Next: waiting for answers

Eyes on Macworld for next move

By now, surely everyone in or near the PC or publishing business knows the basic story: A desperate Apple Computer, in a stunning coup, has announced that it intends to buy Steve Jobs's Next Software in a $400 million deal that is likely either to restore both entities back to their glory years, or to sink both even deeper into the quagmire into which both had become mired. It's too early to venture a prediction as to which it will be, because Apple is holding off discussion of how it plans to use the Nextstep operating system to restore its competitive position against Microsoft.

Hopefully we will have a better idea of the situation after Macworld, which opens on Jan. 7 in San Francisco, where Apple's chief, Gil Amelio, is expected to address the issues in public. We'll provide full details and analysis of those developments after the show, but in the meantime, we thought it would be interesting to raise a few of the questions that analysts have been focusing on in the early days.

The deal. At first blush it may seem as if Apple impulsively agreed to pony up roughly the same purchase price as Be computer was demanding — and which created such a roadblock. Plus there were reports that toward the end Be dropped its asking price to $200 million. (Was that ever an overplayed hand, or what?) But when you look at how the deal is structured, most of the $400 million purchase price will be able to be written off by Apple in less than a year.

It has something to do with Next's losses over the years (which have been considerable) and other financial arcana, but the bottom line is that the Apple purchase of Next was a win-win for both parties financially. Steve & Co. got a nice payoff on what was a dubious investment, and Apple got a polished, reasonably modern OS for next to nothing (no pun intended).

The Jobs controversy. As part of the deal, Apple co-founder Jobs will rejoin the company as a part-time consultant to Apple CEO Gilbert Amelio. At first glance, this appears like a real coup. Jobs symbolizes the excitement and innovation that characterized the original Apple — something that has long since gone from the company. Can it be resurrected?

Maybe. But instead of being paid in Apple stock, which would have given him a real incentive to make a success of the new Apple, Jobs was paid a tidy sum in cash. That, in addition to his ongoing interest in his Pixar company, may result in a less beneficial role for Jobs than Apple needs.

Significantly, Apple's honchos have downgraded Jobs's role in every press conference or briefing since the initial shocker of a press conference. One Valley wag has said that Steve's access card will be programmed to allow access to the Apple campus no more than ten hours a week. Clearly, those who are hoping that Steve will return to Infinite Loop waving the pirate flag of yore, rallying the troops at the bastions, are likely to be sadly disappointed.

Developer dilemma. Apple's bungling of its operating system evolution has been legendary, as delay after delay and derailment after derailment have produced a very cynical, albeit still loyal, customer base. The Next acquisition, which calls for the two parties to merge products, employees and services into a single company managed by Apple, provides Apple with an operating system with most of the features that it has been lacking (including preemptive multitasking, multithreading, protected memory and symmetric multiprocessing). Nextstep also is a very developer-friendly environment, which should help.

But will it be enough to attract developers, who have been drifting away steadily from Apple and who have never paid much attention to Next? Among the developers who have shown a lack of enthusiasm for the Next merger is David Winer of Frontier, one of the staunchest Mac developers since the beginning. Among Winer's comments was this: "Nextstep is Apple's operating system. Get used to that idea. It's uncertain if there will continue to be a Macintosh as we know it. The deal positions all software made for current-generation Apple hardware as being Legacy, which is another way of saying Obsolete."

Winer added that he will finish version 4.2 of Frontier for the Mac, but after that he is moving to Microsoft's operating systems (Win95 and NT), not Next's. If Apple wants to take advantage of developers' innovations, and the work of others, they must get a convincing story in place quickly, he said.

The I word. Amelio cited the Internet as being one of the driving forces behind the selection of Next, and indeed Next has played an important, if only footnote-worthy, role in the development of the Web in that Tim Berners-Lee developed the first WWW server and browser on a Next box (ironically, a character-based application-graphics didn't come to the Web until Andreesson and company invented Mosaic at the University of Illinois on Sun workstations).

Apple, like many companies, was asleep at the switch when the Internet tornado hit, but unlike other companies, most notably Microsoft, it has been slow to respond. The result has been that, unlike in the publishing space, where most new innovations and applications first came out on the Mac, and were only later ported to Windows, the opposite is true in the Internet space — most new applications and browsers are developed first for Windows 95 and NT, and are only later ported to Apple, if at all.

Nextstep, being a Unix variant, is inherently Internet ready. But most of Next's developments have been focused on the server side. Indeed, Jobs was recently quoted as saying that the client side isn't very important. Given the Mac's traditional role as the universal client, the Next acquisition doesn't automatically buy Web content developers and surfers anything.

And this creates another problem: Apple is in desperate need of an ability to demonstrate quickly to both developers and customers why the Next platform will be a compelling choice over various flavors of Windows. It's not that cool developments won't be coming out now that Apple has blessed Next. But the current lack of anything that will demo well (server stuff is usually fairly prosaic to watch in demos, no matter how cool the functionality is, because everything happens in the background) will force Apple to say "trust us" that developers will again start developing for Apple's platform first.

Been there, done that. Next is no stranger to the publishing industry. When Jobs first announced the Next cube in 1988, it was widely hailed as the next-generation Macintosh by many in the industry, including this publication. Its rich GUI, based on Display PostScript, made it a natural for graphics applications, and indeed among the first applications demonstrated on the platform was FrameMaker. The high price of the initial workstations, coupled with Jobs's insistence on using nonstandard media delivery formats (no floppy, with an oddball optical drive the only software delivery mechanism), caused the platform to ramp up much more slowly than Next had hoped. Because of its rich set of object-oriented developer tools, which arguably are still the easiest to use in the industry, and its use of Display PostScript, a number of prepress system vendors have had a go at developing products on Next over the years, although most were eventually ported to the Mac and Windows:

• Linotype-Hell has sold a number of Signastation imposition systems, which has excellent functionality but has been somewhat stigmatized by its platform.
• The German OneVision company has been raising eyebrows with its product for Next, which may be the most versatile software product for publishing on any platform. Among its functions are page layout, graphics manipulation and imposition, but until now all eyes have been watching the company's port from Next to Windows. That could change if Apple succeeds with its Next initiative, but it's unlikely it will stop work on the Windows port in the interim.
• The Belgian FirstClass NV produced a good PostScript editor, which has won citations for excellence but didn't get much market success until it was ported to the Mac. (How's that for irony?)

Some companies, including Quark, have talked about versions of their software for Next, but never started a project because the platform didn't take off. Quark has always turned a deaf ear toward arguments that it should develop for this or that platform for God and country, preferring — as have most software developers — to follow the money, which has meant the Mac, and now, increasingly, Windows.

Gosh, having the spotlight turned on Next again brings back half-forgotten memories of notable Next-based products that always promised to be a better mousetrap due to the wonderful features of the Next environment, but never made a dent in the market because Next never really was a player. Most notable among these were the Pages Software document composition program led by Mike Parker and colleagues, and Archetype's Next-based composition engine. We doubt that Pages will be reincarnated under Apple, but look for various companies' long-dormant Next products to be dusted off and re-released trying for quick wins.

Other platform ponderables. Also of interest is how Apple plans to position the Next environment with respect to the Macintosh OS. Will it continue support and development of both platforms? Will current Macs be able to run the new operating system? How compatible will existing applications be in the new environment?

In its various press conferences, Apple said it was committed to releasing two 7.x upgrades in 1997. Both will include elements from the now-defunct Copland development effort, including the new multithreaded Finder (which will give legacy Macs — gee, see how easy it is to slip into the new vernacular? — somewhat more robust multitasking features for those applications that will be written to take advantage of it). But given that the Mac OS has just been labeled an evolutionary dead end, it will be interesting to see which, if any, developers make that investment right now.

Apple's Ellen Hancock refused to close the door on further System 7.x development — understandably, since to do so would likely kill current Mac sales, especially since it isn't clear where the cut-off point will be in the Mac evolution below which the new Next-based OS won't be supported. Will Apple follow a two-prong approach à la Microsoft with its NT and Windows 95 offerings, where NT is positioned as the industrial-strength version of the Windows GUI? This analogy would be more compelling if Apple had a much larger market share than it currently has. As it is, ISVs have been increasingly hard-pressed to justify developing new versions of their applications for the Macintosh, never mind two flavors of the Mac.

Even more intriguing is the fact that all recent Next product offerings have been targeted at the corporate inhouse developer market. Amelio has made no secret of his desire to pursue an "enterprise strategy," which when you think about it has been the siren song that has diverted Apple's attention and resources several times in the past. Although the Next GUI is well-adapted to developing graphic applications, it is unlikely that it will serve as a platform of choice for consumer and K-12 applications, which is one of Apple's largest current markets. Although it is well suited to the requirements of professional publishers, any decrease in Apple's overall market share will make it even less likely that new, innovative applications will be developed exclusively for the Next environment, particularly in the Internet space.

For the record, the first Apple systems using the Nextstep environment are supposed to be released in the 1997 time frame, according to Amelio, although the first release will have only "moderate" legacy Mac compatibility. The first "more fully compatible" release will come out sometime in 1998.

Nextstep currently runs on Intel Pentium, Motorola 680x0, Sun Sparc and Hewlett-Packard PA-RISC processors. No PowerPC port of Nextstep has been released, although the companies promised both Power Mac and PowerPC versions.

However, it doesn't take a rocket scientist to figure out that unless Apple decides to kill off the other platform ports (which would be an unbelievably stupid move), Apple customers for the first time will have their choice of multiple hardware architectures on which to run their applications. That, coupled with the enterprise focus, also means that Apple will be competing more head-on with Microsoft — which in recent years has gone out of its way to help keep Apple in business.

A good leading indicator of how Microsoft will view this development will be what it says about porting Microsoft Office to the Apple Next OS environment. Watch Microsoft's reaction closely. It could portend interesting times ahead for all following this saga.

The bottom line. Macworld may shed some light on these issues, but we don't expect to get any real answers that quickly. No matter what is said and done at that show, it will take time to sort out the options, get developments into high gear and start to dent the market.

There are so many unanswered questions: What Apple technologies such as QuickTime, OpenDoc, QuickDraw GX and Open Transport, to name just a few, will be ported to the Next environment? Which Next-specific technologies — most notably Display PostScript — will be kept on board? (Look for a lively bake-off between the QuickDraw GX proponents within Apple and the die-hard Display Postscript fans at Next in the months ahead.)

The bad news on that front is that Apple doesn't have a lot of time to wait while strategies are formulated and ideas move from the drawing board to the lab to the market.

The good news is that the deal brought to an end speculation about what Apple would do to invigorate its next OS release and that it has given a lot of Macophiles reason to be optimistic once again, although how long the euphoria will last remains to be seen.

The acquisition of Next also demonstrates once and for all that Apple is no longer hamstrung by the "not invented here" syndrome.

Had this happened a year or two ago, it would have been easy to say that the race is on again. By now, however, it will take near flawless execution, and no small measure of luck, to pull off the hoped-for results:

• Next developers will need to prepare a flawless, quick port to the PowerPC.
• Apple must find a way to preserve legacy Mac compatibility.
• Developers need to be convinced that the Next strategy will garner the critical mass they require to make it worth their while to develop products for the platform.
• Jobs needs to become an Apple proponent again by galvanizing Apple's employees, undertaking speaking engagements and bashing competitors as only Jobs can do. Although he has stated that he will not devote full-time efforts to Apple, a little attention from the charismatic Jobs will go a long way.

It's a tall order, and one that all but the most zealous Apple evangelist might find to be unlikely, given Apple's (and Next's) track record. For starters, Jobs has given no indication that he intends to lead the charge, and until recently was saying that Windows has won, and the Mac was dead. Of course, we're all entitled to change our minds, and a resurgent, competitive Apple (like world peace) is always a good thing to wish for. But once the parties celebrating The Deal wind down, Apple and Next will be left with the daunting task of making it work — and convincing the rest of us that it's worth staying on board for the ride.

— Craig E. Cline with Stephen E. Edwards and Patricia J. Smith