Apple's Latest "Speedbump": Simple obstacle or something more?

Written By: Mike S.

If you've seen my posts on message boards there's a good chance you might label me an "Apple Apologist" because I'm likely to be found quoting Phil Schiller or Steve Jobs on a controversial topic. Why? I guess because their standpoints are official. They're from the horses mouth if you will. What sets me apart from most "Mac Zealots" or apologists, however, is that I don't quote the company line on technology issues. Supercomputers (with the exception of the brief period when that line was factually correct due to old export guidelines), 2x the speed of Pentiums, etc.. are all marketing BS. I may defend the company's image but I won't lie to people.

By now, most of you have probably read about Apple's latest announcement. For the benefit of those that haven't I'll briefly explain. After the market closed on Sept. 28th, Apple made an announcement that their earnings for the quarter will be "substantially below expectations". Factors sighted include lower educational sales and lower than anticipated Cube sales coupled with a slow down the entire computing industry is facing.

iCEO Steve Jobs commented that this was merely an unfortunate speedbump and Apple has plenty of cool products in the pipeline to get things going again. I'll admit, I love Apple's hardware. I think the Cube is phenomenal in many respects but apparently there are less people out there who think like me than Apple was expecting. Then again, maybe plenty of people are just like me, they love the product but aren't buying it for whatever reason.

Is this "speedbump" really as simple as Steve Jobs would have us believe or is it a warning shot? An indication that Apple needs to make some changes now for things are only going to get worse from here?

First of all, I don't want to spread FUD so I want to make it perfectly clear Despite Apple's lowered expectations for the quarter they are not even close to announcing a loss. Their lowered estimate is around $1.9 Billion in revenue and earnings of 30¢-33¢ per share before their typical one time gains from selling investments. For comparisons sake, Dell is expected to announce earnings of 25¢ per share for the quarter and Microsoft 41¢. As you can see, Apple is still a financially strong, debt free company with lots of cash in the bank.

With that statement out of the way I can get on with the issues. Let's start with the PowerMac G4 Cube. This is probably the coolest computer being made today. It's small, it's quiet, it's air cooled, it "breathes" when it sleeps, it reacts to your body's energy fields and the innards are accessed in a way that's reminiscent of pulling a nuclear warhead from it's shell. This is the kind of cool that Apple prides itself on and is probably an example of the cool products Steve Jobs says are in the pipeline. Unfortunately, the king of cool doesn't have as many subjects as Apple had hoped.

What does this mean? Does it mean people are tired of cool? I don't think so. As far as I know the new iMacs are doing fine, their design is the most refined yet and Apple is doing a great job in getting the prices down. The new iBooks also seem like excellent values with DVD, 466 Mhz G3s and Firewire. How they sell is yet to be seen but for the sake of argument I'll assume they do well. Their consumer line's continuing success proves that cool does sell but what Apple needs to realize is that the cool factor should be used as their ace in the hole, not the sole reason for the products existence. The iBooks and iMacs do well because their price/performance is good (despite the on going processor issues) and they are cooler than the competition.

I'll admit it, I was wrong. I said the Cube's style justified it's premium price but in reality the price is it's achilles heel. The popular press pretty much focused on two negative issues when reviewing the cube, price and RAM. In this instance, disaster can easily be averted if Apple wises up. They should up the RAM on all their G4 pro products, 128 MB minimum and 256 MB on the high end, then cut the prices. The iMac DV SE is $1499? Make the Cube $1499. It includes no monitor so it won't hurt iMacs and the low end G4 is $100 more but is 50 Mhz faster and, more important, it's expandable. With more RAM and a lower price I bet Cube sales will improve dramatically. The savings will mean you can have the world's coolest computer with a 17" monitor for $1899. Not bad at all.

The next issue is educational sales being in a rut. I really don't know anything about the difficulties Apple must face in education so I can't comment on what I think Apple should do. Somehow, I doubt the solution would be as easy as cutting prices. I'd also bet the issues are far more political than technological. On a bright note, OS X could be the shot in the arm Apple needs to re-energize their higher education status since it's far more suited to the needs of computer science students than Mac OS ever was.

Apple also seems to have a renewed focus on the scientific community with OS X. This being the case I think they should take a look at what Sun offers and use that as a template for their next pro desktops. MP is a good start, now the needs expansion slots, bandwidth and powerful video. If they can create something that competes with Sun's workstations while maintaining their current prices they'd be in an awesome position at the high end. I think this same model would work well for their core graphics market and surly 3D would benefit as well. Seeing as Apple has some of the highest margins in the PC industry, if not the highest, I'd say they could accomplish this task profitably.

I hope I'm not giving the impression that I think I have all the answers, I don't think that at all. If I had all the answers I'd surly be a rich man with a company of my own. No, I'm just sharing opinions from the perspective of a lowly customer as well as those of a person who reads the commentary of other people.

It seems to me this incident will be the test of Apple's current management. The Apple of old would simply shoot over this bump and continue along their present course. They'd justify people's complaints of high prices with one term: industrial design. In other words, Apple's legendary arrogance would steam ahead.

A new Apple, on the other hand, would see the writing on the wall. They'd see that their path needs adjusting. Having the coolest products is a great thing but it's utterly meaningless if the value of that product is questioned by the majority of the people who are expected to purchase it. The new Apple would take a good long look at their pro offerings and then take a good long listen to their pro customers and armed with this knowledge they'd create new products. A new Apple would simultaneously realize that building something people asked for doesn't mean you have to charge them more.

Regardless of whether Apple is old or new I'll still be their customer for my needs are well met by their products and I love cool and unobtrusive. Internal expansion isn't on my priority list and never has been. Lower prices are appreciated, however.

Is this so called speedbump a simple obstruction to be rolled over? It is for now but if Apple doesn't learn from their past it will become a spiked strip: ripping the tread off of Apple's tires, stopping their forward momentum and leaving them stuck as the rest of the industry speeds by them at 70 MPH.

If that happens I sure hope Steve Jobs has plenty of company saving products in him because an Apple that doesn't listen must constantly push the envelope and I just don't think that's possible for any one company.


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