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ATPM 4.11
November 1998



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Apples, Kids, & Attitude

by Robert Paul Leitao,

The Old Days

“Tomorrow, I have to dress for school like they did in the old days,” my seven year-old daughter informed me. “Really?” I replied. “Yeah, like they did in 1996,” her five year-old brother responded. For Mac users, 1996 may seem like the old days! With the release of Apple’s iMac, the company’s history and future have been changed.

Among the things that astound me about the iMac and Apple’s newfound success isn’t the popularity of the Bondi Blue Mac or Apple’s stunning financial results. It’s the fact that few companies made plans to capitalize on the iMac phenomenon. USB products may be new to the retail channel, but USB is not a newly developed technology. Even with several months of lead time, peripheral manufacturers are only now releasing iMac-compatible USB products. This is because very few companies expected to see Apple’s robust and timely turnaround.

During Apple’s “old days,” owning a Macintosh was often a lonely and frustrating experience. That’s because few outlets carry Mac compatible products and less than a handful of publications offer Mac-specific information and advice. Reporters habitually used words such as “beleaguered” and “troubled” as if they were official prefixes to the Mac maker’s corporate name. It’s amazing how things have changed in a little more than two months.

On October 14, 1998, Steve Jobs, Apple’s interim CEO, put a ceremonious end to Apple’s “old days” when he officially announced the company’s quarterly and yearly results. For the first time since 1995, Apple Computer had a profitable year. To put this impressive accomplishment in its proper perspective, it’s important to note that in 1995 Apple Computer earned about $400 million on sales of $11 billion. In 1998, Steve Jobs and the Apple team earned over $300 million on less than $6 billion in sales!

Evidenced by Apple’s slide in revenue from 1995 through 1998, the vast majority of home and business computer users now purchase Windows-based machines. What the general public may not understand is that purchasing a Mac isn’t about choosing a Wintel alternative any more than buying a BMW or Mercedes is about finding a substitute for a Dodge minivan. Mac owners choose to buy Apple’s products, including the new iMac, because they are elegant, easy-to-use, and provide a more pleasurable personal computing experience. People who don’t use Macs don’t understand our fondness for them. Conventional wisdom dictates that the Mac and the Mac OS should have gone the way of the Amiga computer and the Betamax video format.

Apple’s former CEOs Michael Spindler and Gil Amelio presided over a company that had lost much of its relevance in a Windows dominated world. What Mr. Spindler and Dr. Amelio failed to express to computer buyers is that Apple’s main competition isn’t Microsoft; it’s Compaq, Dell and other computer hardware manufacturers. If this weren’t the case, Steve Jobs would not have eagerly sought to end the company’s legal feud with the software giant.

The Mac OS is a superior operating system. But the vast majority of computer users are not power users, graphic designers or content creators. With the release of Windows 95, most computer buyers did not see an advantage to spending the extra dollars to buy Macintosh hardware. This is why one of Steve Jobs’ first moves was to spend large amounts of money on advertisements that distinguished Macintosh hardware, in particular the G3 processor, from products made by other hardware manufacturers.

Apple’s arrangements with the clone manufacturers were based on the false premise that the company would profit if the clone makers worked to expand the market for the Mac OS. But Apple is first and foremost a hardware company, not a software company. The clone makers did little more than make a business selling less expensive computers to Apple’s established customers. Steve Jobs made the right decision when he refused to grant the cloners licenses for Mac OS 8. The iMac represents the first fruits of Apple’s go-it-alone strategy. There may be a time when Apple revisits the clone issue, but that will depend more on Apple’s manufacturing capacity and revamped business model than the simple desire to increase market share for the
Mac OS.

The new Apple Computer can thrive on a little more than half the sales volume of the old Apple Computer. This is because the company has drastically cut its costs of doing business, realigned its manufacturing systems and canceled virtually all non-essential products. In other words, the company can sustain its profitability on today’s sales, not yesterday’s wishful thinking.

The Macintosh may never have a 30% share of the consumer market. But Apple doesn’t need a large share to compete with Compaq, Dell and Gateway for total sales volume anymore than Mercedes or BMW would need it to compete with Chevrolet or Ford for total auto market share. The iMac is a less expensive Macintosh, but it’s not an econo-box computer. Comparing Apple products solely on price to computers made by other PC makers is a waste of time and effort.

People who buy Macs do so because they offer superior hardware and a more elegant and user-friendly OS. While Macs may be a better value over time, I don’t know of anyone who has purchased a Mac versus a Wintel box because they thought the Mac had a lower initial purchase price. Outside of Mr. Spindler’s 1995 effort to sell older Apple technology at reduced prices (a move that ultimately destroyed the value of the Performa brand name in the minds of buyers), Apple has never been in the low-cost computer business.

During Apple’s “dark days” (the period that immediately followed the release of Windows 95), Apple lost its sales and marketing focus. The company tried to maintain market share by offering a dizzying array of products that only confused computer buyers. I remember the multi-page advertisements that featured a mind numbing variety of Macintosh models. Not only did this effort lead to horrendous inventory and parts management problems for Apple; it made purchasing a Mac a needlessly complicated endeavor. Buyers are attracted to Apple products because the company has a reputation for innovation, not because the company has dozens of lower-cost products to sell. Designed and marketed properly, Macs tend to sell themselves.

Over the past eighteen months Steve Jobs has canceled several ancillary products that were in various stages of development so that he could focus the company’s efforts on the forthcoming Mac OS X and the design of innovative hardware products. Inasmuch as that Mr. Jobs is derided for having a “reality distortion field” that supposedly engulfs and mesmerizes those around him, his return to Apple Computer has brought the company a much needed acceptance of today’s market reality.

Apple Computer used to operate like it was an island unto itself. The company’s products were designed with little regard for industry standards and with a belief that Mac users would blindly pay more for Mac compatible peripherals and products. However, consumers will only pay more when they believe there are distinct advantages to their investment.

The iMac is a terrific example of design and marketing “done right.” USB peripherals for the iMac will be no more expensive than their Wintel counterparts. The fact that Apple was able to sell almost 300,000 iMacs in their first 45 days of availability is a testament to the company’s forward-thinking approach to the marketplace. Critics claim that similarly equipped Wintel boxes retail for less than $1,299.00. But no other computer offers a sleek, all-in-one design and the promise of box to Internet in less than ten minutes. If time really is money, the iMac is the best value for the dollar.

I’ve been an iMac owner since the day of its official release. In the two and one-half months the Bondi blue computer has been in my living room, I’ve encountered just a few minor problems: Iomega’s delay in releasing a USB version of its Zip drive has made it difficult to transfer data from my other Macs (sorry critics, a floppy drive wouldn’t come close to handling the load); the need to download an iMac update and software driver in order to properly use my new Epson printer was a bit of an inconvenience; and the bundled version of Microsoft’s Outlook Express leaves much to be desired in the mind of this Claris Emailer fan. All things considered, it’s the easiest set-up I’ve had for any computer on any platform.

Apple’s first fiscal quarter (the fourth calendar quarter) will be marked by significant year-over-year revenue gains thanks in part to the release of the iMac in many overseas markets. Due to tight inventory controls and an orderly rollout of the iMac in Asia and other key regions, I anticipate Apple’s fiscal first quarter performance will comfortably surpass the third quarter’s $100 million dollar profit.

Survival has been Apple’s first priority. Had this been any other time in the company’s history, I believe updated PowerBook and desktops would have been available for the Christmas season. However, customers aren’t the only people Apple needs to impress. Despite’s the company’s recent success, there are a cadre of very vocal critics who question the prospects for Apple’s long-term success. It’s my view that Apple has slowed the pace of its new product introductions in order to maintain strict cost controls and all but guarantee high profits for the quarter. Soon after New Year’s Day, the patience of Mac users will be rewarded when the company releases its consumer laptop and its next generation of PowerBooks.

Survival is a funny thing. No matter the era they live in, people are faced with new and exciting challenges. While I don’t wish to make an absurd analogy that likens the relative comfort in which Mac users have endured Apple’s difficult times to the extreme hardships and sufferings experienced by America’s frontier pioneers, I do believe there is something to be said for the way we choose to travel life’s journey.

It was the Conestoga wagon that aided America’s frontier pioneers in their search for land and opportunity. It’s the personal computer and the Internet that aids today’s families in their worldwide quest for knowledge and information. I can’t imagine anyone embarking on the Oregon Trail without regard for the quality of their transportation equipment. Likewise, I can’t imagine why a computer buyer would be more concerned with the initial cost of their CPU box and monitor than the quality of its components. Granted, few people’s lives have been put at risk surfing the Web, but if you’re going to travel the world via the World Wide Web, I’d think you’d want the best apparatus available. The iMac and Apple desktops are the best all-around computing value for the money.

Unlike the frontier settlers who traveled great distances to buy hardware and supplies, today’s cyber travelers can purchase a PC by phone, over the Internet or by taking a ten-minute ride to the mall. The mall is where we headed to find my daughter’s “old days” attire. My kids and I scoured Macy’s and Sears for old-fashioned aprons, bonnets and heavy leather shoes. Unfortunately for my daughter, the mall stores no longer carry clothes like they wore in the “old days.” For that matter, they no longer carry outdated Macs.

After locating an “oldish-style” dress at Macy’s in the eclectic collection of clothing commonly referred to as the clearance rack and a quick phone call to my children’s mother to locate an apron, we were able to assemble an ad hoc “old days” ensemble for my daughter. The dress was not of her choosing, and like any independent seven year-old with a bit of fashion taste and flair, she had her own opinion. I liked the dress and I thought it had a very attractive price. No matter the cost, she stated rather matter-of-factly that it was a dress she’d only wear once. Come to think of it, I haven’t seen the dress since I dropped her off at school for “old days.”

Maybe there’s a lesson to be learned here. The same little girl who wasn’t fond of her ad hoc “old days” attire, happily chooses to sleep in her oversized iMac T-shirt. I guess she doesn’t want an ad hoc clothing ensemble in her closet any more than I want an ad hoc computer in our living room. Thanks to Steve Jobs and the Apple design team we have an iMac

Happy Thanksgiving from our family to yours! [apple graphic]

“Apples, Kids and Attitude[TM]” is © 1998 Robert Paul Leitao,

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