NEW YORK (CNNfn) - A powerful new board and an infusion of $150 million in cash by Microsoft Corp. buoyed Apple Computer's stock price Wednesday, but some analysts warned against overreacting to what will be a long-term convalescence.
Apple stock rose nearly seven points after co-founder Steve Jobs announced four new board members and a partnership with archrival Microsoft to help steer the beleaguered computer maker back into the black.
By Wednesday's close, Apple stock (AAPL) was 6-9/16 higher at 26-5/16 on the Nasdaq market.
However, investors might see their Apple shares stall when the industry realizes the problems at the company won't be solved overnight, some analysts said.
"What we are not paying attention to is that Apple continues to lose market share, it continues to bleed red ink," said Robert Walberg, an analyst with Briefing.com, on CNNfn's "Digital Jam."
Apple's sales have dropped from $11.1 billion in 1995, to $9.5 billion in 1996 and roughly $7 billion expected for this year. The company reported losses of $56 million for the third quarter ending in June.
Jobs will join the board along with Larry Ellison, chief executive of Oracle Corp.; Jerry York, a former chief financial officer at IBM and Chrysler Corp.; and Bill Campbell, chief executive of Intuit.
"Apple had a very decent group of people as their board of directors, but it was time for a change," Jobs said. The company needs to focus on priorities, he said. (201K WAV) or (201K AIFF)
The board will wait to name a chairman after the company picks a new chief executive. Former chief executive Gil Amelio was ousted in July.
Gene Glazer, an analyst with Fortis Advisors, said the naming of the chief executive will be bigger news. (181K WAV) or (181K AIFF)"The critical direction that will be set by Apple will be by the new CEO and chairman," he told CNNfn.
But David Wu, an analyst with the Chicago Corp., said Wednesday's announcement is an important start. "If you don't have a good board, how on earth can you attract a good CEO?" he said. "Can the company turn around by just having a new board? No. But you have to start somewhere."
Jobs made the announcement during his scheduled keynote address at the MacWorld Expo trade show in Boston. The audience hooted and cheered during his speech. (193K WAV) or (193K AIFF)
"This will add a tremendous amount of expertise," said Jobs.
Ellison would contribute valuable software expertise to the board while York has a proven record turning around Chrysler and IBM, Jobs said, and Campbell is a former vice president of sales and marketing at Apple during the company's heyday.
Two other board members - Ed Woolard, chairman and former chief executive at Dupont, and Gareth Chang, president of Hughes International - will hang onto their board seats, Jobs said. But board members Mike Markkula, Katherine Hudson and Bernard Goldstein will step down. Delano Lewis, president and chief executive of National Public Radio previously resigned following Amelio's ouster.
As part of the pact with Microsoft, Apple will put Microsoft's Internet Explorer browser on its operating system. In turn, Microsoft will buy $150 million of non-voting shares of Apple stock at market price, hold the issues for at least three years and continue to develop versions of Microsoft Office for the Macintosh.
"It's a package announcement today," Jobs said. "We're very excited about it."
The deal could allay one big fear of investors that software makers won't continue to design products for Apple. For Microsoft, with some $9 billion in cash on hand, it represents a small but potentially good long-term investment, said Walberg. (236K WAV) or (236K AIFF)
The audience booed and hissed as Jobs introduced Microsoft chairman Bill Gates, who spoke to the audience via a video feed.
"It's very exciting to renew our commitment to the Macintosh," Gates said. "We're very pleased to be supporting Apple. We think Apple makes a huge contribution to the computer industry."
Wu said it's common in the technology industry to find companies that are customers, competitors and partners at the same time. "Microsoft and Apple have always had a love-hate relationship," he said.
New board member Ellison said during videotaped remarks that Apple shouldn't worry about competing with Microsoft. "Apple needs to worry about doing something different. It's back to innovation and creativity."
Some analysts said what Apple needs to do is concentrate on areas where it has remained strong, such as education and desktop publishing.
"Apple is now a niche player and the key is what can you do in that niche," said Glazer. "You focus on where you're strong."
-- Martine Costello