CHASTENED NEWTON TURNS 1 WITH HOPE INTACT

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Apple Computer's much-hyped and much-ridiculed Newton personal communicator will be 1-year-old tomorrow, and Apple finally seems to appreciate the gravity of its mistakes.

But in a category that shows early signs of being dead on arrival, Apple is betting there still is life left in Newton. And the category may give a new twist to Newton's law: Products may be falling now, but the category is still poised to soar-eventually.

The original Newton MessagePad personal communicator was a good first try at a technology but a marketing disaster.

"The fundamental problem that we had with Newton was a hype problem," an Apple spokesman said. "We learned our lessons."

Newton's hype machine has largely been disbanded. Three of Newton's most public boosters-Apple Chairman John Sculley, Newton division General Manager Gaston Bastiaens and Michael Tchao, Newton product manager-have exited in the past year. The division now is being run by Apple Exec VP-Chief Financial Officer Joseph Graziano, suggesting an emphasis on controlling costs. Apple President-CEO Michael Spindler skipped the Newton product unveiling, but has said the marketer is committed to the business.

Apple still is "110%" behind Newton, the spokesman said. "It's an investment that we feel is worthwhile simply because we believe the product category is due to take off."

Apple erred in overselling Newton, pouring millions last fall into TV and magazine ads from BBDO Worldwide, Los Angeles, for a device years away from Mr. Sculley's mass-market dreams.

Analysts figure Apple invested hundreds of millions of dollars in Newton, with far less than $100 million in revenue so far. Indeed, only an estimated 100,000 Newtons have been purchased, said Jon Hulak, an analyst with BIS Strategic Decisions, Norwell, Mass.

Still, keeping Newton alive may not be a bad idea. Smart money still is betting on long-term prospects for wireless portable communications devices. For now, this is a category that only a true contrarian could love. Last week, AT&T announced the closing of its majority-owned EO, a pioneering personal communicator marketer that sold about 10,000 devices during its year on the market.

Motorola last month said it was delaying the introduction of Envoy from this summer till late this year. IBM Corp. and BellSouth Corp. have postponed the Simon, a cellular phone-based personal communicator originally expected in March, to late summer. And Compaq Computer Corp., developing a model with Microsoft Corp., scuttled its initial product earlier this year.

Yet most industry players and watchers still see great potential in affordable, portable devices that combine various communications tasks, such as phone, fax, paging and e-mail-sort of a Newton with all the bugs worked out. AT&T, for example, said it intends to return.

Paul Saffo, a research fellow with the Institute for the Future in Menlo Park, Calif., said early failures don't take away from long-term prospects. "It's a brand new market with brand new products with brand new consumer needs. Is it any surprise that the first products failed?"

Newton succeeded in some respects. The brand accounted for about two-thirds of the 120,000 personal communicators marketers shipped in 1993, with Tandy Corp., Casio and AT&T's EO operation accounting for most of the rest, Mr. Hulak said.

Apple earlier this year introduced a much-improved Newton. And it has scrapped the mass ad campaign in favor of more targeted marketing toward mobile business users.

"We took our lumps," Apple's spokesman said. "We've learned and moved on from there."

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