(FORTUNE Magazine) – TO WHOM IT MAY CONCERN:

Thank God Larry Ellison is not buying Apple Computer.

We all know that being CEO of Oracle is a bit boring for him. And we all know he's richer than Croesus and thinks he's smarter and more aggressive than Bill Gates, even though Gates is richer.

But he would have been all wrong in Cupertino. Ellison is not a hardware guy, and he's not a hands-on, gung-ho manager. That's why he'd have been just as poor a CEO of Apple as the last guy, Michael Spindler, and the current guy, Gil Amelio.

So Ellison's out of the picture, for now. That doesn't change the fact that someone out there still has to come along and save this company. So this is a letter to you, whoever you are. (I'm going to call you Big Daddy, just for fun.)

I've got a kinder, gentler approach to saving Apple from itself. But first, let's make sure we agree on a few of the fundamentals of selling computers.

--People don't buy operating systems. Nor do they buy microprocessors. This is what is so immensely frustrating to others in the industry about the positions that Intel and Microsoft hold. Their products sit in the heart of the computers that people buy, but neither company has to work all that hard at selling the merits of those products to customers.

What people do buy are computer systems. The moment that someone makes the decision to buy a computer, whether for his company or for himself, he is buying the way the whole system works: how well the operating system, microprocessor, and other components work together; how well a wide variety of applications programs work with the combination; how well software developers enjoy making programs for the system; and--most important--how well the vendor is moving the system forward, so that customers know they will be able to replace the machine they have now with a better version in the future.

--The marketplace has room for multiple, incompatible computer systems. It has become the common wisdom that it is not possible to have more than one computer system; indeed, virtually everybody believes that eventually every personal computer on this planet will be based on technology provided by the Wintel duopoly (see "He Wants All Your Business").

This is not true. It has never been true. Ever since personal computers were invented, different systems have coexisted. There's a standard system made up of different components from different vendors that accounted for a large share of the market. And then there are several alternative systems provided by one or more single vendors. Over the past 20 years, customers not only tolerated but welcomed some level of choice in the marketplace.

Now there is even more reason for multiple, incompatible computer systems to thrive. With the rise of the Internet, we have a strong networking standard (called TCP/IP) that is rapidly becoming ubiquitous. With a single standard, thorny issues of distributing software and sharing data are resolved on the network. That means the network operates efficiently no matter how diverse the computers it connects.

--Building a computer system is not that hard. People tend to associate some level of black magic with the integration of microprocessors, operating systems, hardware, and tools. But few realize how many such systems already exist, many created and maintained by companies far smaller and less capable than Apple. U.S. Robotics' PalmPilot, for instance, has its own operating system, tools, and applications, all generated by one of the company's smaller divisions. Set-top boxes made by General Instrument and Scientific-Atlanta are small computer systems. So are the Apple Newton and the Nintendo 64 videogame player. Even Windows CE, an operating system provided by Microsoft for hand-held machines sold by Casio, Philips, Hewlett Packard, and others, is a different operating system from Windows, running on microprocessors that aren't necessarily made by Intel.

In other words, complete computer systems--with or without Windows software and Pentium chips--aren't extraordinary at all. Contrast that with the fact that for years, both Apple's critics and Apple's management have moaned that the company's woes were in great part a result of its failure to deliver an entirely new version of the Macintosh operating system. Sure, Apple's programmers have the expertise to create a new system. And sure, they've been hampered by poor management, a slew of strategic mistakes, and their own irascible nature.

But the hullabaloo about a brand-new operating system is misplaced, as I opined in a February column that explained why Apple's purchase of Next Software was a mistake. Events appear to bear me out. At the time, Apple said it would build a new operating system, code-named Rhapsody, by combining the Next and Macintosh software designs. Now Apple is positioning Rhapsody for the enterprise market, which is thoroughly dominated by Wintel. That's a dumb idea and an indication that a new operating system is not the answer. Meanwhile, the company appears to have its programmers trying to fix the current Macintosh operating system as fast as they can. That's a better idea, since improving the Macintosh operating system would benefit Apple's 25 million existing customers, the loyalists who have to stick with the company if it's got a shot.

That brings us back to the central question, Big Daddy: What will you have to do to get Apple rolling again?

I think the one point we can agree on is that Apple's management has not been able to solve the company's underlying problems. To be fair, the current team has accomplished several major objectives, including reasonable financial management and a stable approach to cost control. But if Apple is ever going to solve its real problems, it needs to recruit a new CEO, one who cares about the company and has the experience to reinvent the core of Apple's business as a newly exciting product line.

Suspend your disbelief for a moment, Big Daddy. Pretend that you bought the company. Pretend that you looked around for an industry veteran who cared about and had a plan for the company. Pretend that you asked me to be CEO.

Glad you asked. Here's my plan:

--Take one more huge write-off. Apple has to be a smaller company to find the running room it needs to demonstrate success --i.e., growth and profitability. That means it needs to lay off even more people, at least a couple of thousand. It probably also needs to regroup inside the Apple R&D campus and close many of its other buildings in Cupertino and other areas. This would send a message to employees and customers that Apple is no longer interested in saving the world or reinventing technology. Instead, it wants to concentrate on making better Macintosh computers and commanding a dominant share of the Macintosh market.

--Refocus all research and development on better Macintosh hardware and on fixing the existing Macintosh operating system. Apple's hardware is already pretty good. But the company insists on being just different enough in its selection of components and in its designs that its machines are inevitably slightly behind the Wintel world in either cost or features. Someone needs to jump down the throats of the hardware engineers and create a new culture of discipline and focus, one that results in hot machines that compete with Compaq and the other brand names.

Just as important is fixing the Macintosh operating system. Apple has to do what Microsoft does (without announcing these plans to the entire world, as it is wont to do). It needs to excavate and replace the innards of the old operating system. This is very hard, because while you are digging and reinventing, people think you are making no progress. How many times have you heard that Microsoft doesn't innovate but just copies other companies' innovations? That's a direct result of Microsoft's incredible focus on maintaining an appearance of compatibility while constantly renewing its old software. To pull that off, Apple will have to stop work on Rhapsody--no matter how good it is, no matter how appropriate it is to the enterprise applications market. The enterprise is not the focus of the business. Apple also has to stop work on Newton, no matter how good it is. Newton is not the focus of the business.

--Forget about competing with Microsoft and Intel. As long as Apple is measured against Wintel, Apple loses. So the company needs to define its market differently. It seems to me that figuring how to get 25 million people around the world to constantly buy new computers and software from one company is a pretty decent business. Indeed, I can see how just that focus would lead the company to create a compelling and attractive product line. Perhaps, then, in the year 2001 or 2002, Apple would once again be a hot company, watched by the rest of the world for clues about the future of technology.

There you have it, Big Daddy: A pretty basic formula for success at Apple. Combine the best of Amelio's management practices with a passion for great Macintosh computers, and plug away, in a focused fashion, until your customers once again have faith in your ability to deliver.

Oh, by the way: If you find yourself owning Apple without anybody to run it, come talk to me.

REPORTER ASSOCIATE Sheree R. Curry

STEWART ALSOP is a partner with New Enterprise Associates, a venture capital firm. Neither he nor his partnership has financial interests in the companies mentioned. Alsop may be reached at stewart_alsop