Bruno,

Marein is looking into the NCC hotel situation and

she will let you know as soon as possible.
Here is my organizational chart

Mac Int'l
(JKH)
|-James Higa
------------------------------
| |
Software/Europe Hardware/AFEA
(Bud) (JKH acting)
| |
---------------- -----------------
| | | |
SW Prod. SW Loc'n Exp. Work Stations Office
(Marein) (Donatien) (Hans) (Didier)

Bud is responsible for all software products, third party software, localization issues. He
is also the primary point of contact for the European issues, especially production and
distribution. Marein works for Bud, and she will do project/event planning and
localization coordination for Macintosh sw products. Donatien will serve as our inhouse
localization expert to support third parties for questions on localization and to set up in-
house product testing for the masters. At this time, I am managing the hardware group
and am the primary point of contact for AFEA. Didier is responsible for the 7/7 release.
After that he will concentrate on new office products (512, Laser Printer, etc.). Right now
and in the near future I will be working on the new product strategy directly with Barbara
Koalkin and all the areas. Hans is the product manager for Macintosh and related
hardware products (Apple, third party peripherals,etc.).

I hope this clarifies some misconceptions. If you have any further questions, please do
not hesitate to call me. I will be in Japan the following week, but James will know how
to reach me at all times.

Best regards,

Joanna Hoffman
List of Tasks to be Completed Before the EuroTour.

Trip Related: Press

•Collate all the information on the final schedule, personages, major issues into a packet.
(Call Jane Anderson re. the reporter profiles)
•Meet with Steve and review all of the above and make a list of visual aids he will need
to take with us.
•Get all the final market research info on Apple's market share in each country. (Look it
up in the old PIP's,etc)
•Get the numbers on units sold everywhere in the last 12 months, peak month in each
country, the general ramp. (James and market research group). Get the peripheral
numbers as well.
•Population, GNP, no. of small businesses etc. data per country (James, market research
and the available study from ITC?)

Trip Related: Marketing Presentations

•Latest ad campaign tapes (ask Terry Adams about formats).

•All information on the hundred day boost program.
•Some slides and information on the third party program, development environments, list
of the most important developers and time lines.
•Complete product packet of A products (retreat info) with some time lines.
•Success stories from the dealers, press, analysts, etc.
•Complete DataComm story, Complete AppleBus strory
•Localization responsibility overview and tentative project schedule (James).
•Allocation and forecasting overview for the next six months.
•Future directions and future products story, our organization chart.
•How will we handle large accounts???
•Meet with Barbara and finalize the list of materials required for the above.

Localization Seminar

•Meet with Alain and evaluate the latest plans. Try to push it out by at least one week.
•Get the status of the product ship dates and tasks.
•Assign someone to take over the product ship matters until product ships, especially in
view of the localization seminar. Finalize who is going and why.

Pricing

•Finish the European pricing proposal before trip.

•Get a sign off on the AFEA pricing proposal from Steve immediately, Europe as well.
New products/projects

•Get someone rolling on the software product management (e.g. Pascal)

•Get Bud to represent us at the hardware product meeting (e.g. Laser, File Server, etc.) for
the time being.
•Get Alain to keep driving the resource editor development and design.
•Marein will continue to oversee the Lisa shipments, upgrades, allocation, and forecasts
until May.√
•Make sure Alain has taken care of Multiplan localization, etc.
•Bud will help James with forecasting consolidation and review. √
•Start recruiting for a good product manager type, especially Italian with strong technical
background (Get Mary Fortny started before the trip).
•Determine the allocation through June and leave it with Bud.
•Get Bud to represent the Int'l group at the manufacturing response meetings.
•Didier will handle the spring release and drive Macworks for the time being. √
Barbara,

The following is a list of my six month accomplishments and goals for the review:

Six Month Accomplishments

--Shipped product internationally end of May. Localized products shipped to UK,

France, Germany, Italy and Australia.
•handed localization material to Cork and participated in production hand-off;
•coordinated with areas the final review of localized material;
•worked with distribution to assure smooth hand-off of product.
--Conducted a localization seminar, documented the localization process and started
handing off localization to the areas, even though resource editors are not ready.
--Established two third party localizers in the US for third party software.
--Shipped Lisa 2.0 software internationally.
--Finished shipping the upgrade kits in Europe.
--Worked closely with international advertising and PR agencies for Mac programs
around the world.
--Worked closely with Japan on putting Apple Japan together and devising a product
strategy for Japan.
--Participated in the European PR trip for Mac.
--Continued working closely with engineering on localization and product design.
--Build an international team and lived through Mac/Lisa merger relatively successfully.

Shortcomings

1. Late shipment of product in Europe seriously jeopardized our credibility, but has
taught us a lot in the process.
2. We did not receive the localization tools (resource editors) from the lab, therefore all
our localization plans (for follow on products and second tier countries) are
approximately three months late.
3. In general our group needs tighter discipline and good project planning.

Goals

1. Get as much software as is feasible to the international markets:

•Apple software--
--MacPaint/MacWrite in secondary markets (Japan, Benelux,
Quebec, Latin America)
--No later than three month delay for localized software in
primary markets and six months in secondary markets.
--Get 7/7 out in UK, Australia and Canada concurrent with US
and three months later in other primary markets.
 •Third Party (US and Int'l)--
--NCC: bring US developers together with International
distributors and facilitate the signing of deals. Bring several European
software developers and expose them to US distributors. Publicize the easy
localization tools at the international third party station.
--Put together a September software distributors conference
that brings together 40-60 US developers and International distributors for
comprehensive presentations and deal making.
--Seek out and publiceze more third party localizers (in addition
to the ones already established)
--Conduct period 'on-site' presentations for major US software
developers to raise their conscioussness for International and make sure that
they are developing their software in a localizable fashion, publicize
localizers and loc'n tools.

2. Ship 512K Macintosh concurrently with the US ship--

•forecasting
•allocation
•production
•product localization (if any)

3. Help the company define a Japanese strategy:

•Assist with the 1985 Business Plan
•Ship Kana Mac in August
•Define a localization policy for a J-Mac
•Localization training
•Help define a strong Japanese third party strategy--
--Technical training
--Marketing/Economics training
--Pro-forma contracts and certification criteria

4. Help in promoting excellence and efficiency in marcom materials int'ly:

•Collateral Material Design Input--
--Generic whenever possible for world-wide leverage
--Timely information to the arears
•Design the low cost solution for manual production for our secondary
markets and for models for third parties.
•Give access to timely and accurate product information for int'l agencies.

5. Define the Macintosh Office Systems requirements and strategy internationally:

•International PIP for the Office system by September
•Event planning and participation from the division
6. Process impovement:
•Define the localization policy for all software and hardware products
•Meet with major market representatives at least quarterly
•Restore credibility after the Macintosh shipment delays
•Clean up the forecasting process.
•Help Cork to become an efficient Mac and Lisa localizer and assist Zeist in clean
distribution of Macs.
•Work with manufacturing to solidify production plans for Int'l
•Build a solid international product marketing team (hire and train two more
people).
TO: John Cavallier
FM: Joanna Hoffman
SJ: Pricing of Unlocalized Macintosh for Japan
DT: February 12, 1984

Based on the competitve environment in Japan, a Macintosh cannot be priced much

above US$2,500, if it is to attain market success. With assumed uplift of 15%, 20% to
the distributor and 33% to the dealer, $2,500 end user price translates to about $1360
Apple's price to Japan. The cost of Macintosh in Japan is $1850: this means that Apple
loses $490 per Macintosh given current sales forecasts (5100 Macs) and local fixed costs
of $4.8 million.

I am prepared to be challenged on my assumptions for dealer and distributor margins,

however, I believe the ballpark figures above are close enough to indicate a real exposure.
We need to look closer at the forecast and breakeven schedule, and how prepared Apple
is to take a hit to the bottom line and for how long.

Analysis for cost calculations are attached on the following page.

Japanese Mouse-Based Systems

The two most widely available mouse based systems in Japan currently are NEC
(PC-100) and Sharp (5500).

Of these, the 8086 based NEC PC-100 is the best selling one. A configuration of the
system with the following features: 256K of RAM, mouse, one drive, black and white
display and software that includes, JS-WORD, Multiplan, N-BASIC (NEC's own
BASIC), and MS-DOS, retails for US$1635 (assuming $1=¥280). The Sharp system in a
similar configuration is priced just a bit lower. The software on these machines is not
very well adapted to the mouse. There is no integration of software. ( NEC will
definitely put Microsoft Windows on the system in the future.) Macintosh is also a much
faster machine than any of the above.

Thus Macintosh is really in a different league and should command a premium.

However, we cannot justify more than 50% premium on the price to the customer in the
light of Japanese customers' expectations on the hardware (more memory, a hard disk or a
printer bundle).

It is worth noting that when we start pricing peripherals for the Japanese market, we will
be faced with an even stiffer competitive situation.
Progress Report for International Joanna K. Hoffman

Progress
Macintosh--Europe

All localized material for the UK, French, Italian, and German product are completely
released to production. Cork has all the necessary parts to ship localized product in May,
except for the 220v Macs and the French Guided Tours.

Production is still hoping to get some 220v. Macs to Europe in May. We still do not have
a firm grasp on the numbers and times.

Prepared the localization seminar to be held in Paris in May. The seminar will teach the
areas (UK, France, Germany, GEA, Latin America, Quebec) how to localize Macintosh
Software.

Prepared for and accompanied Steve Jobs on his European Press Tour. Results were on
the whole very positive.

Macintosh--AFEA

Entertained Canon Sales representatives and worked with Apple Japan to resolve
requirements/misunderstandings with respect to localization, service and support,
technical training, technical support, third party software development and distribution.
Most of the issues were resolved to mutual satisfaction. We will ship Kana Macs in July.

Continued discussions on Canadian advertising and PR plans.

Lisa

The first Lisa 2/10 build for International was completed. The demand for Lisas is very
good internationally.

All international keyboard layouts have been corrected for Spring Release and the pre-
release version of the 3.0 software are in the areas.

Plans
Make the first shipment of first 220v. Macintoshes to Europe and Australia.

Agree on a plan for the shipment of localized product to second tier countries.

Conduct the localization seminar.

Support Canon's efforts in the Japanese Business Show.

Finalize the Kana software localization.

Issue a policy statement on Forecasting and Pricing for International.

Start preparations for the June conference with country managers.

Problems

Getting all the localized materials from the countries has been a very interesting
experience. We are working on ways to make it less painful in the future.

Due to the unavailability of the universal power supply boards we have been shipping US
110v units to Japan. The power supply was not speced or tested for Japan. We are trying
to keep the numbers to a minimum to avoid future service problems. We are also
tracking failures carefully.

Due to the focus on the primary markets, slippage of deliveries and limited resources in
Macintosh International we will be late in delivering to the second tier markets, such as
Benelux, Sweden, Quebec and Latin America.

With the departure of Federico and Marein we are very short handed in handling all
products in the division, e.g. we have not even started looking at Pascal.

The countries need better/closer contact with the divisions. We will increase the
frequency of face-to-face meetings and formalize the means of communication to remedy
the problem.
TO: John Cavalier DT: February 16, 1984
FM: Judy David, A. Javier Ergueta, Joanna Hoffman
SJ: Pricing of32 Super Micros in the AFEA Region

Executive Summary

After a careful analysis of costs and marketing parameters, we propose the following
ASP's for the Apple 32 Systems from Apple to the regions:

Mac Lisa 2.0 Lisa 2/5

Australia 1566* 2301 3394

Latin America** 1449 2202 3127
Distributor 1365 2150 2985

The pricing proposal for Macintosh is derived from a model based on fully allocated cost
plus analysis. We propose an ROS of 15% to Apple, based on the competitive
environment.*** This number compares favorably with the average estimated ROS for
domestic of 14%. In our models, we have assumed current manufacturing cost levels.
Our ROS will improve as manufacturing costs decrease and as sales volumes increase.
Thus we are being conservative in relation to the domestic ROS.

Lisa 2.0 pricing is based on contribution to corporate fixed costs of 10%. Lisa 2/5 pricing
is at the breakeven point, and therefore does not contribute to fixed cost absorption.
Under this scheme all local costs are covered in both cases. This pricing scheme for
Lisas is motivated by the high inventory exposure.

No pricing is provided on Lisa 2/10, because accurate manufacturing cost numbers are
not available at this time.

An analysis of the Japanese pricing and market situation follows in a separate

memorandum.

A more detailed exposition of our models and assumptions is given below.

--------------------------------------------------------------------------------
*Australia has already announced a retail price of Aus.$3445, or Aus.$3008, without tax,
equivalent to US $2734 (w/o tax). This price includes 17% uplift for freight, etc., and
33% dealer margin. Thus Australia is in effect contributing almost 12% to company
profits. Under our model, $1631 would contribute the desired 15%.
**For arbitrage reasons, the price in the Carribean region must parallel US prices, and
therefore will contribute lower profits. The actual numbers will be analyzed separately.
***See the first footnote.
Objectives
• Develop a model that allows for pricing based on the local costs and market conditions
of each of the following regions: Australia, Japan, Latin America, and Rest of the World.
• Propose prices based on the above model and examine their consequences.

Model
Price(channel) = C(mfg)+VC(sales)+FC(local)+FC(corp.alloc) + ROS
where:
Price(channel) — the price charged to the distributor or subsidiary by Apple,
C(mfg) — fully loaded manufacturing cost,
VC(sales) — variable sales costs, including Coop, rebates, etc., as percent of sales,
FC(local) — fixed sales costs of each region divided by Mac regional unit
forecast,

FC(corp.alloc) — corporate costs allocated to Macintosh minus non-applicable costs,

such as cost of North American sales, etc., divided by Mac regional units.
ROS — Return on Sales.

The chart below summarizes the costing structure per unit product, assuming current
forecasts.
Results

The following table shows the ASPs corresponding to ROS's of 15%, 10% and breakeven
points for all products.
The price of $2180 for 2.0 and 2805 for 2/5 have already been quoted to some
distributors. These prices were communicated with the understanding that they were
preliminary. These estimated prices were calculated based on the US pricing strategy.