An interesting article on Newton and PalmPilot :
March 2, 1998
Apple Drops Hand-Held Newton Line,
Abandoning Plans to Spin Off the Unit
By JIM CARLTON
Staff Reporter of THE WALL STREET JOURNAL
R.I.P. Newton.
Friday's surprise decision by Apple Computer Inc. to kill the
Newton hand-held computer consigns one of the computer
industry's boldest experiments to the history books.
The Newton's fate exemplifies the
perils of delivering products ahead of
their time -- and weighing them down
with hype out of proportion to their
performance. The decision, the latest
reversal by interim Chief Executive
Officer Steve Jobs at the troubled
company he co-founded, provides
another clue about Apple's strategy to
remain afloat.
Apple officials said they would cease
further development of the Newton
technology, including the hand-held
MessagePad and the portable eMate, as
part of a plan to focus resources on the
company's mainstream line of
Macintosh computers. Mr. Jobs had
earlier reversed a plan to spin off the
Newton unit as a separate entity, a
move widely seen as a sign that the
technology would play a role in his
evolving strategy for Apple.
Newtons Won Critical Acclaim
While newer Newtons have won
critical acclaim, the product never
recovered from bad publicity about
flaws in its vaunted ability to recognize
users' handwriting.The MessagePad
was overtaken by upstarts -- notably a
device called the PalmPilot, which
proved the appeal of hand-held devices
that do a few things well. About
200,000 MessagePads have been sold
since 1993, analysts say, compared
with more than one million PalmPilots
in less than two years. The
MessagePads never turned a profit.
Some analysts wondered why Apple didn't license the
technology at some price instead of killing it outright. After all,
Apple had already invested an estimated $500 million over the
past decade.
But Apple's decision reflects its difficult straits. Before finally
turning a $47 million profit in the most recent quarter, the
Cupertino, Calif., company reported a loss of nearly $2 billion
over the previous two years on a plunge in sales and in share
of the computer market. The company is also still seeking to
hire a permanent chief executive officer, after a
seven-month-long quest that has been complicated by Mr.
Jobs's dominant role there.
Mr. Jobs referred questions to his lieutenants at Apple. Chief
Financial Officer Fred Anderson said the company plans to
re-enter the hand-held computing market next year with
products based on the Macintosh operating system. "We are
focused on taking an Apple of $6 billion to $7 billion in
revenues a year to a higher level [and] the Newton product line
does not fit into that mission," he said in a teleconference call
with reporters and analysts. "You are better off putting all the
wood behind one arrow."
Mr. Anderson confirmed that Apple had considered selling the
Newton business, but concluded it could not get enough money
to offset the loss of the engineers needed for the forthcoming
mobile devices.
Apple provided no details of the future products, but analysts
speculate they will be patterned after the unique design of the
eMate, a computer shaped like a clam shell that primarily was
targeted at schools. The MessagePad's sales were focused on
workers who had to work in groups and needed easy
communication, such as in hospitals or trucking.
Project Was Begun in 1987
The Newton project was begun in 1987 around the innovative
concept of a computer converting a user's handwriting into
electronic text. By the early 1990s, then-CEO John Sculley
made the project a high-profile symbol for the company's
vision and industry influence. "Personal digital assistants," as
Mr. Sculley called them, were billed as a pivotal step in a
convergence of the computing, communications and
entertainment industries.
But the first Newtons, introduced in mid-1993, struggled. At an
initial price of close to $1,000, they were far too expensive for
the mass market. And the handwriting recognition proved so
flawed that the computer was lampooned by cartoonist Garry
Trudeau in his "Doonesbury" strip.
"What happened is the Newton got stigmatized," says Roland
Deal, director of business development at Visible Interactive
Inc., a software firm in San Francisco that has been using
MessagePads for years. "When people would ask me about my
Newton, it was like, 'Oh, does that thing work?' "
The PalmPilot, now owned by 3Com Corp., can access data
with a pen-like device but is primarily designed as a
pocket-sized calendar and rolodex, mostly for information
transferred from a desktop PC. Paul Mercer, a former Apple
engineer, says he tried to sell Mr. Sculley on such a simple
device in 1991. Dubbed the Swatch, after the popular
wristwatch, he developed 10 prototypes that were based on the
Macintosh operating system and designed to sell for as little as
$300. Mr. Sculley said he doesn't recall the details of the
Swatch proposal.
Mr. Mercer says Mr. Sculley rejected the development
proposal, partly due to opposition from Apple's own engineers.
"It's a big shame that Apple blew it," says Mr. Mercer, now
president and chief executive of Tacit Software Inc. in
Cupertino, Calif.
Over the years, the MessagePads were improved to reliably
handle a range of functions, including accessing files from the
desktop computer and wireless paging. Still, sales never took
off in a big way. Chief Executive Officer Gilbert Amelio last
summer set the business up for sale by spinning it out into a
separate division called Newton Inc.
But Mr. Amelio succumbed to a board coup that transferred
power to Mr. Jobs, a Newton critic who said at an Apple
developers' conference last year that he had tried one but
"threw it away." He folded the division back into the company
and initiated an internal review that culminated in the
cancellation. The unit's work force has shrunk by two-thirds
over the past six months, to about 50 people, who will be
reassigned.
Since Mr. Jobs was first ousted by Mr. Sculley in 1985, some
see his Newton move as sweet revenge. But Mr. Sculley,
ousted himself in 1993, said he was surprised at how long
Apple continued to fund the product. "The basic idea of
hand-held devices seems to me as valid today as ever, says
Mr. Sculley, who now invests in industry start-ups. "The place
where Newton broke down was that it got ahead of itself."
Still, news of its death came as a shock to a cadre of customers
and software developers for the machine. At Newton Source, a
store in San Francisco's financial district, a Newton developer
who calls himself Lunatic E'sex commiserated with salesman
Lee Wolfe.
"I think it's just hideous, man," Mr. E'sex said, shaking his
waist-length hair. Mr. Wolfe, nodding, added: "This is a huge
surprise. We were expecting Apple to at least sell it off."
Mang
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