Apple's esprit de core

Laying aside their rivalry, Microsoft has taken a bite of Apple. Is the future sweet as pie? asks Cliff Joseph

Apple may still be losing huge amounts of money, but at last week's MacWorld trade show they finally had something to celebrate. And they did it with considerable style.

The night before the show started Apple hosted two parties with hundreds of guests. They started the evening at a giant computer games arcade then moved on to one of Boston's largest night-clubs, where they'd booked James Brown for the evening. To top it all off, they sponsored a firework display that lit up most of Boston harbour.

The following morning we learnt where they'd got the money to pay for all this. Steve Jobs opened the show by announcing a series of agreements with Microsoft. The two companies were burying the hatchet after years of bitter rivalry and Microsoft had agreed to invest $150m in Apple, as well as paying an unspecified amount to settle an outstanding patent dispute. The news of this agreement boosted Apple's share price from $19 to $26 in the space of three hours.

An even more significant part of the agreement was Microsoft's commitment to produce a version of the Microsoft Office suite for the Mac for at least the next five years. Microsoft Office is the dominant suite of business software and Apple badly needs a Mac version of Office in order to hang on to many of its large business customers.

For an encore, Jobs announced an entirely new board of directors. Until last Wednesday, Jobs actually had no official position at Apple and was simply described as "a consultant". There was little doubt, though, that Jobs had engineered the mass resignation of the old board and the appointment of their replacements. An interview with former chief executive Gil Amelio, published earlier in the week, had strongly implied that Jobs was also behind Amelio's recent forced resignation.

There was rapturous applause from the audience of Mac fans when Jobs confirmed that he would be returning to the board of Apple, more than 10 years after being deposed in a boardroom coup.

The appointment of his friend, Oracle chief Larry Ellison, received a more muted response. Many followers of Apple fear that Ellison wants to use Apple to further his own personal rivalry with Microsoft's Bill Gates. However, Ellison backed the agreement with Microsoft and acknowledged that "Apple needs to forget about competing with Microsoft".

Gates even put in an appearance via satellite. The audience, who were more used to thinking of Gates as the Antichrist, couldn't decide whether to cheer him or boo him, but they managed a modest round of applause after Gates promised "to renew our commitment to the Apple Macintosh".

Another new board member, former Apple employee Bill Campbell, tried to draw a line under Apple's recent troubles with a blunt dismissal of the previous board. "The old board is associated with the past - and the past has been a failure."

Attempting to prove that Apple was putting its recent troubles behind it, Jobs revealed that Mac OS 8, the latest version of its Macintosh operating system software, had sold more than a million copies since its release on 22 July.

There was more good news from IBM and Motorola, which produce the PowerPC chips that Apple uses in its Macintosh computers. They announced two high- speed processors that Apple claimed would give it the fastest desktop and laptop computers in the world. One of the new chips, code-named Mach 5, is used in three new Macs that Apple launched at the show. The Mach 5 chip runs at speeds up to 350MHz and Apple claims that it is faster than any of Intel's Pentium processors.

The second new chip, the PowerPC 750, is just as powerful but uses a new design that has very low power consumption. This means that, unlike a Pentium processor, it can run at full speed in battery-powered laptop computers. Pentium processors need more power, so the processors used in Pentium laptops can't run as fast as those in a desktop PC. But Motorola claims that a Mac laptop with a PowerPC 750 processor will be just as fast as a desktop machine.

Apple didn't announce any new laptops at the show, but Motorola stated that the 750 processor would be available in quantity within weeks, so Apple will probably release products using the new chip before the end of this year.

The one bad omen amid all this good news was the near-collapse of Apple's relationship with its licensing partners. Apple licenses the Mac OS to several companies that produce their own Mac "clones", but sales of these clones have been damaging Apple's own sales. The company has been attempting to renegotiate its licensing agreements, but the talks have been dragging on for months and have now sunk to the point of public squabbles between Apple and the clone companies.

The head of one clone company, Power Computing, abandoned the demonstration of a new product, saying that no one would ever be able to buy it because Apple was screwing up the negotiations. Power Computing even picketed Jobs's speech, with black-clad employees handing out leaflets criticising Apple.

Apple executives admit to being furious with Power Computing, and Steve Jobs is reported to have called the clone companies "leeches". That was an unwise remark, since one of those leeches is Motorola, the company that Apple buys its PowerPC chips from. That hint of arrogance reminded many people why Apple got rid of Jobs in the first place.

None the less, Apple had a very good week. It still doesn't have a chief executive or a chairman, but there's no doubt that Jobs is in charge and that some of his charisma is rubbing off on Apple. As one executive said, "perception is critical", and Jobs has managed to create the perception that Apple is finally getting its act together.

The company still has a long way to go, and its licensing dispute looks like turning into a major problem. But if Apple can't return to profit with the likes of Microsoft, IBM and Motorola behind them, they will have no one to blame but themselves.