imac meets ideath? 30 january, 2001 by johnmichael patrick monty monteith

It has been over two years since I have written an article surrounding troubles in Cupertino, California, the home of Apple Computer. At that time Apple shares were going for twenty dollars a share, and losses were mounting on the horizon. Things changed. In fact, for the most part, it has been two full years of nothing but glowing things to say about the Macintosh industry. Sure, while none of us liked the idea of Apple destroying the Mac-Clone market, and we questioned the "Think Different" campaign, we still remained open-minded. Our wait-and-see attitude was a good move since these controversial choices proved to be works of genius. Who would have guessed the colorful iMac would be considered a work of art, and the stock price of Apple would split and still surpass sixty bucks a share?

But those days could not last forever ..

Today the Apple iMac is a computer for last year's shopper, Apple is announcing losses, and Apple stock is once again in the twenty dollar a share range. What happened to the utopia called Cupertino?

The most obvious mistake on the part of Apple and its supporters is the belief system that Steve Jobs single-handedly brought profitability back to the company. In fact, the true turn-around happened due to Gilbert Amelio's work, the CEO before Jobs. Amelio, while not popular at all, hacked Apple computer down to a profitable computer manufacturer. He did such a fine job of it that even after Apple purchased NeXT Computer for a sizeable sum and took on a rather expensive advertising campaign to improve the public image, the company still was turning a profit.

Amelio's cost-savings work has kept Apple Computer a profitable machine for the past couple of years. Now his magic is beginning to wear off, and we are starting to see the results of Job's work. While I firmly believe that Steve Jobs can continue to have Apple Computer innovate itself and turn a sizeable profit, many of the problems that plagued Apple before Amelio's work have started re-surfacing.

For example, Apple Computer once again has huge inventories of computers that never sold over the Christmas holiday that it must slash the prices on so it can move new machines. This inability to determine supply and demand has been a continued nightmare for Apple Computer, and is extremely unfortunate that it is showing up again since it almost always means big losses.

Apple just recently announced their new Titanium PowerBook G4 that Jobs claims a billion people will want. While Steve may be exaggerating demand slightly, he is right that these sexy machines are going to be a hot item. So hot, in fact, that many question whether Apple can produce these suckers to fill the supply channels. With iMac computers sitting around, and Titanium notebooks nowhere to be found, Apple has a recipe for problems identical to years before.

Then there is Apple's operating system nightmares. While many Mac zealots would love to ignore this fact, Apple has been announcing a next-generation operating system since 1994. Seven years later, long after Copland and Rhapsody had been forgotten, Apple is finally releasing Mac OS X. Long-time Mac users are complaining that this operating system has ignored Apple's simple roots, and non-Mac users are claiming this operating system is too little too late.

In fact, it is difficult to understand how OS X found it's way in the Mac line-up. It is a Unix based operating system, much like Linux, with an interface and stability comparable to Windows 2000. This new operating system is not as stable or compact as Linux (not to mention is not free), and does not have the market share available to it that Windows 2000 has. In many ways OS X is simply the convergence of Linux and Windows 2000 for a market one fiftieth the size. It hardly has the makings of a winner.

At the same time Apple is losing the edge that it has had for years. For the first time Apple is not the number one manufacturer of computers for schools. That honor is bestowed upon Dell Computer. If one considers the entire WinTel market as a single source of competition for Apple, the numbers get far more dismal on the education front. It seems that Apple is no longer the choice of educational institutions due to it's lack of Windows compatibility, and that seems like an impossible hurdle to overcome.

While Apple was focusing on designer plastics for computers they completely ignored countless computer revolutions happening around them. The most obvious being the digital music craze happening on nearly everyone's desktop. Home entertainment buffs started putting their entire music libraries on their PC, and a whole new market was born. From burning CD's to Napster swapping to digital wireless stereo receiver devices, all making the PC the center of the home stereo. Certainly during all of this Apple had music software and CDRW drives available for their iMacs and MacCube, right? Guess again.

The same was happening on the video front the writeable DVD drives available as standard equipment on PC's for over a year. Apple finally figured out that, despite their movie editing software on the iMac, video enthusiasts were still buying PC's. Now a Mac G4 comes with a DVD drive for burning home movies. While only months late to this craze, some would say too late to even join the music burning party.

All of this might sound like I believe Apple is in trouble, but I do not. Even though Apple's stock price and situation looks similar to years ago, this is a different day. Consumers firmly believe that Apple is the innovator of computer technology with the hippest products available. With a new Titanium notebook and a sleek G4 touting DVD burning capabilities on the hardware end, and a slick looking stable true pre-emptive multitasking operating system in OS X greeting us on the software end, Apple is still pushing the technology envelope.

We should not be naïve enough to believe that Apple will always be the first to the party on new trends. The company is too small to do that. In addition, Apple is years (if ever) from being able to truly compete on the software end with the likes of Microsoft. As great as OS X is, it is not Windows 2000. While it attempts to compete with the lofty feature list of Windows 2000, the ability to run Windows software is a trump card that will always beat even superior operating systems.

Apple does not need to be first, nor does it need to be best. It just needs to appear as the leader, which Steve Jobs has always done a nice job of doing. The Macintosh since day one has been a niche computer, and every attempt to grow out of the niche status has been a disaster for the manufacturer. Look at what happened to IBM after the clones flourished? Yes, it secured Microsoft and Intel as leaders of personal computers, but at the cost of the manufacturer. Apple realized it was likely to suffer the same fate when it tried to increase market share through clones and lower priced systems. Fortunately, Steve Jobs realized that it was better to be the coolest computer manufacturer of a small market than just another manufacturer of a big market. While the Titanium PowerBook and MacCube may get the headlines, it was the destruction of the Mac clone market that is deserving of praise.

Right now Apple has reached another turning point. It can push forward with innovative products for it's niche market, or it can re-assess the potential of competing with the WinTel world. If Apple wishes to compete with Microsoft, that will require the company decide if it is in the hardware or software business. This has been a decision Apple has avoided making, and unfortunately is a distinction that must occur before true competition with the dark side can occur.

If Apple is a software manufacturer intent on competing with Microsoft, it must release it's software (OS X) for Intel machines with the same fan-fare it does Titanium notebooks. Apple the software manufacturer cannot compete when the potential sales market is a sliver what is available to Microsoft. Therefore, despite the love of the Macintosh market, if Apple wants to be the king of software, the focus must be on the same hardware that Microsoft writes for.

If Apple is a hardware manufacturer intent on competing with Dell and Gateway, it should finally do so. Release the PCube, the iWinTel, and the TitaniumPC. While there are not billions of people waiting to buy a Titanium Powerbook Mac, there are billions waiting to buy cool looking Windows compatible hardware. Apple could truly change the hardware landscape. Imagine how many educational institutions that would buy Apple products if only it were WinTel compatible?

Still, I am content with Apple as a slick manufacturer of technology-leading computer goods. Over the next couple of months we will see how Jobs does at keeping Apple moving full speed ahead. Can Apple produce the Titanium's necessary to fill demand? Can Apple get rid of the iMacs sitting in warehouses, and release a new iMac dramatically different and new yet just as hip as the old ones? Can Apple return to profitability and bring the stock price back to the level it was a year ago?

It is exciting stuff down in Cupertino. And, I for one bet that we will see the rise of Apple come again very soon.