The restructuring, the second in a year, will cost Apple a total of $250 million in charges to earnings for the next three quarters, the company said.
Meanwhile, Apple expects revenue for its fiscal second quarter, ending March, to plunge 22 percent to about $1.6 billion because of weak Macintosh sales. Apple said it plans to drop its Macintosh Performa PCs -- the models geared toward home users -- to concentrate on its more profitable Power Macintosh line.
"It's very painful to have to lay off people who have worked so hard during the past year in trying to bring Apple back to health," Chairman Gilbert Amelio said. But Apple needs to cut $500 million in annual costs just to break even this year, he said. Apple was bold to cut so many jobs and to discontinue one of its key brands, analysts said. But the company still does not have a clear plan to get sales going again.
"The company is on the aggressive side on reducing costs," said Walter Winnitzki, an analyst at PaineWebber Inc. in New York. "But the issue for me is, can Apple reignite its sales momentum?" Hampering Apple's efforts to reignite sales, the company also said it will not ship its long-awaited revamped operating system -- the software that controls the basic functions of its PCs -- until at least June 1998, about six months later than the company had previously said. Investors and Apple customers have been counting on the new operating system, code-named "Rhapsody," to give Apple's computers a clear technological lead over PCs using technology from Intel Corp. and Microsoft Corp.
The uncertainty surrounding the Cupertino, Calif.-based computer maker will keep customers away from the Mac isle at computer stores, analysts said. "They're still in the same dilemma," said analyst Eugene Glazer of Dean Witter Reynolds. "It's a niche company with declining market share." The job cuts include 2,700 full-time employees and 1,400 contract workers. Apple plans to give employees 60-day notices later this month. Before the layoffs, Apple employed about 13,400 including contract workers. In the fiscal second quarter ending March 31, Apple will take a $155 million charge against earnings to cover the cost of the layoffs.
The company also plans to take another $322.5 million charge for the December acquisition of Next Software Inc. Fred Anderson, Apple's finance chief, declined to say what the company's total loss in the second quarter will be, but analysts said their preliminary estimates are close to $1 billion. With the cost cuts, Apple could return to profit by the fiscal fourth quarter ending September, Anderson said.
Apple, which invented the first user-friendly computer, has suffered in recent years from missed opportunities, management turmoil and failed products. Amelio, who took over in early 1996, has been refocusing Apple's effort on its healthiest businesses. As part of the restructuring, Apple will drop development of software based on the so-called OpenDoc technology and computer servers based on International Business Machines Corp.'s AIX standard.
Apple also will stop development of its video-conferencing products. The company will keep its Newton hand-held computer for now, Apple said. The Newton was expected to be discontinued or sold to another company as part of Friday's restructuring. Amelio has been under increasing pressure from shareholders and loyal customers to come up with new products to get sales going again.
On Friday, he dismissed calls for him to step down. "Why would I step aside when we are at the cusp of turning this around?" he told reporters.
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