Newton Inc. - Apple spins off the MessagePad

Apple will spin off its Newton division into an independent, wholly owned subsidiary that expects to be profitable in about a year, the computer maker announced Thursday.

The new company, tentatively called Newton Inc., will begin operation July 1. Sandy Benett, acting vice president for the Newton Systems Group, will run the operation while a CEO is recruited, Benett will serve as COO.

The spin-off, which has approximately 170 employees, will move off the Apple campus in Cupertino California. However, Apple will be a licensee of Newton technology including the increasingly popular eMate 300 portable computer for schools.

In a bit of surprising news, Apple CFO Fred Anderson said the company expects Newton Inc. to be profitable within 12 months of its spin off. "We expect significant growth and profit in Newton's first year," said Anderson.

Benett said sales of the new MessagePad 2000 and the eMate, both introduced in March, have been well above projections. Newton sales, he said, are about three times what they were the previous quarter. He would not release exact figures. "We don't have to be wildly more successful than today" to become profitable, Benett said.

Eventually, Anderson said, more investors could be sought for Newton Inc., or the company could issue an initial public offering. Newton Inc. will be the working company name until a trademark search is completed. Anderson said Apple will fund Newton Inc.'s initial operations, but did not provide details. The news ends several months of speculation surrounding Newton's fate.

A pet project of former CEO John Sculley, Newton was introduced August 2, 1993, into the face of much skepticism. Apple touted the Newton's ability to translate handwriting, but problems with that technology quickly gave ammunition to critics.

Apple slowly improved the machine and its operating system over the years, but the early negative publicity hampered sales.