Cutting-edge Apple iMac takes on PCs

Apple’s interim chief executive Steve Jobs unveiled two new products last week, one the futuristic iMac personal computer, the other the PowerBook G3 laptop, billed as the “fastest notebook computer in the world”.

The launches are the latest step in a recovery programme that has edged Apple Computer back into profit after more than two years of losses.

The iMac marks Apple’s return to the consumer market. The company ignited the PC boom in the Seventies with the Apple l l and reinvigorated it in the Eighties with the Macintosh. But it has lost out in the Nineties to the Windows PCs and last year racked up losses of 1bn.

The computer giant has pulled out all the stops to give the iMac family appeal. The machine is an all-in-one 15 inch monitor and computer, has one-button Internet access and is a designer’s dream – its conical outer casing of translucent plastic even glows in the dark. It is simple, attractive and one of its main selling points is its speed – it contains the PowerPC G3 233Mhz microprocessor.

But some observers question whether the iMac, which will go on sale in August, will be enough to re-establish Apple’s position in the consumer market.

For a start, it has two basic problems – its Internet modem runs slow, with just 33k as opposed to the latest 56k versions, and it does not have a floppy disc drive.

However, this week Imation and Panasonic have announced that they are to market an add-on Superdisk Drive, which will read and write Mac-formatted disks and the new SuperDisks, which have 100 times the capacity of the old disks. As Phil Schiller, vice-president of product marketing at Apple, says: “This announcement from Imation and Panasonic shows that – at launch – iMac customers will have add-on options to complement the Internet-age computer.”

Some enthuse that the iMac will be as simple as a TV set – just put it in the living room and switch it on. If consumers need extras, such as the disk drive, these are available at low cost.

But Paolo Puppoli, an analyst at IT research company Dataquest Europe, is not impressed by the speed factor of the new iMac. “They are marketing it as being the fastest machine available,” he says. “But today we have machines that are way too powerful for the software out there.” He questions whether family consumers need to buy a computer at the cutting edge of technology.

Apple’s UK marketing director Alan Hely says consumers still want a fast-operating machine. “The channels have been crying out for a product that can fit into education and consumer markets,” he says. “Until now that has not been addressed – but it is about to be,” he adds.

The iMac will sell for $1299 in the US and for about 999 in the UK.

Puppoli says: “This machine targets the growing market of families that couldn’t afford a PC before because of the high price, but now want to join the Internet age.

“But it (iMac) is at the high end of the price range of a market in which all other companies are participating.”

Another problem which Apple has encountered is the limited range of software available for its machines. Most software products are targeted at “wintel” based machines – those which incorporate chips from Intel and use Microsoft software. Hely says announcements on new software and computer games compatible with the iMac are expected over the next few weeks.

When Jobs returned to a beleaguered Apple to act as part-time adviser in 1996, he discovered a plethora of computer products which he described as difficult to market.

The company, led by the then chief executive officer Gilbert Amelio, had already embarked on a cost-cutting exercise to tackle losses of more than $2bn (1.2bn), which had arisen over a five-year period.

Targeting one of Apple’s core customer groups – creative professionals in the publishing industry and elsewhere – the company launched the Power Macintosh G3 computer range in November last year. The business machines offer higher margins than consumer PCs.

Sales of the G3 series have helped push Apple back into the black, with the company recording profits for the last two quarters – the first back-to-back profitable quarters since 1995. The launch last week of the laptop version, the PowerBook G3 Series is expected to strengthen that financial trend.

During what is traditionally a slow period, the company announced profits of $55m (33.3m) for the quarter ending March 27 1998 on sales of $1.4bn (848m). This compares with a loss in the previous year’s quarter of $708m (429m) on sales of $1.6bn (970m).

But if the new launches are to be a success, Apple needs to make sure its products are easily accessible to consumers.

In a surprising move in the UK, the company has withdrawn from Dixons retail outlets, saying the move was based on a “mutual” decision. On the high street, the John Lewis Partnership is the sole outlet for Apple.

In the US, the company has also cut back on its retail channels, focusing on a store-in-store concept through retailer CompUSA. That concept will also appear in the UK, at Harrods.

In addition, consumers in the UK will have access to an online Apple Store – launched last Thursday – where they can order and pay for their own configuration of a Mac product over the Internet. The UK Apple Store is the first international extension to the US Apple Store, launched last November.

UK Apple Centres – dealers exclusively selling Apple products – will double their number from 30 by the end of the summer. In addition, Apple products are sold through 700 independent dealers.

But even Hely thinks that the new iMac may need more of a consumer push. He says: “We can meet our sales targets through John Lewis and other innovative ways of bringing the product to market.” He would not be drawn on what those innovative ways would be.

Jobs said at last week’s launch: “Today we brought romance and innovation back into the industry.” Next Christmas will be the first big test of whether this romantic encounter will be sufficient to enable Apple to take on the might of the Windows PCs.

At the time Jobs signalled his new strategy by saying: “What carries Apple forward is being an innovator.” The iMac’s success will be a measure of how far Jobs has got Apple’s strategy right.

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