Apple bites back (online at http://it.mycareer.com.au/opinion/macman/2002/02/14/FFXM2MNFNXC.html)
About three years ago, most Wall Street analysts - which is to say those people in nice suits who get paid lots of money to guess the financial future - were saying variously that Apple was dead, ripe for takeover, marginalised or otherwise forgettable. It should be bought and turned into Clone of Wintel, some said.
The latter idea was, of course, ridiculous, but that's the analyst business. You don't have to be right more than about 30 per cent of the time.
So, where now are the people with the black hats playing the funeral dirges? Apple has become one of only two computer companies expected to march steadily into the future. The other is Dell, which has the mail-order generic PC business by the throat.
These views come out of the worst slump to have hit the PC business since Doug Engelbart whittled the world's first mouse. Sales of PCs are down more than 20 per cent and the corporate market, which is Wintel's biggest, is stagnant and does not see much point in upgrading. But Apple keeps on innovating and serving its niche markets.
Dell makes money because it is big enough and tough enough to screw costs down to the bone and then launch price wars that chop market share away from less sinewy companies. They produce lumpy beige boxes and big black laptops that run Windows software pretty well.
But Apple has learned from Dell and has also become a master of production efficiency. Its product line, once so complicated that not even Steve Jobs could understand it, is now lean and limber.
There's something for everyone, starting with the new dual 1GHz Power Mac, a desktop supercomputer capable of more gigaflops than a swamp full of frogs (15 of them to be precise - 15 billion floating point calculations per second). Then there are the Titanium PowerBooks and the ghostly white iBooks (now two sizes), the new "Luxo Jr" iMac popular with the US education market and they are still selling the basic colourful egg-shaped iMac, though one wonders for how much longer.
Apple's leverage is performance, particularly in multimedia and graphics, an ability to talk to Wintel files and documents in a seamless way and, perhaps above all, lovely, innovative design. They pay huge attention to quality control and they make "the whole widget" - that is, the computer and the operating system and a lot of ground-breaking software as well, such as iMovie, iTunes, iPhoto, iDVD, all of which are free.
They also make Final Cut Pro and DVD Studio Pro - professional video editing packages that have shaken up the leaders in that very demanding industry.
Put that into the language of the analysts and it works out to a 182 per cent increase in sales of iBooks in the latest quarter, which, given current market conditions, must be making smiles in Cupertino. Thus, (more analyst-speak) despite the downturn, Apple's gross margin in the quarter was more than 30 per cent. Only 0.1 per cent more, but still more than three to four times the margin achieved by the Wintel makers.
That isn't to say that Apple wasn't hurt by the downturn. Sales were down 22 per cent before the arrival of the new, flat-panel iMac, when the pendulum began to swing back. People like good design. They like things that are easy and fun to use.
The new iMac looks cool, is well-equipped with features and it's very functional. If you have ever had neck ache from the monitor on your PC, think how nice it would be to have a monitor you could swing up and down to suit your eye level (and your trifocals).
Apple has less than 5 per cent of the world computer market and is unlikely ever to match the sales of Dell, but that isn't the point. BMW has an even smaller percentage of the world car market and it isn't going to outsell Ford, but nobody thinks BMW is on the ropes.
But Apple did need that new iMac. Sales of the old ones were flagging. The new machine was two years in development and arrived just in time to meet what the salesmen are calling pent-up demand in the market, meaning the money people were hanging on to because they couldn't see a reason to spend it.
So, Apple took 150,000 pre-orders for the new iMac within days of the wraps coming off at Macworld in San Francisco last month. The first of the three flat-panel iMac models is now in Australia and elsewhere around the world and the orders are still coming in fast enough to keep the pressure on the factories.
Apple, now lean and as conscious of costs as it is of quality control, is, by many accounts, (remember those analysts) poised to do well from the growing worldwide interest in home entertainment movies, digital images, music and other lifestyle stuff proliferating as broadband networks roll out and begin to make the Internet something better than the World Wide Wait.
