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Surfing Silicon Valley: Back From the Brink

By San Francisco Bureau Chief Greg Lefevre

July 16, 1998
Webposted at 4:05 PM EDT

(CNN) -- Apple and Egghead have the Internet to thank for their rescues from oblivion.

What's the smartest way to pump up your stock? Declare yourself an Internet company. Suddenly Wall Street loves the Web. It may not understand it but it seems anything with an Internet connection has hope.

Eggsample: Egghead

Battered by the megastores and on the brink of collapse, Egghead reinvented itself as an Internet company; desperate, smart -- or both.

Egghead shuttered its nearly vacant retail outlets and went where the customers went -- the World Wide Web. If Chrysler can sell cars on the Web, if Barnes and Noble can sell books on the Web, Egghead can certainly market software to like-minded folks on their favorite turf.

Some of this doesn't make sense. Egghead hasn't announced a profitable quarter in a long time. It has lost money for three years but its stock is triple what it was last month. Go figure.

Speaking of stock jumps, Apple is nearly triple what it was last year. Its story is similar. Radically pare down your operations, concentrate on a core business and head for the Web.

Last fall, Steve Jobs started selling his computers on the Web and BOOM, sales went through the top of the hard drive! Remember Jobs poking fun at Dell's on-line selling site? What few folks knew was that Jobs developed the software that made Dell's site possible. Now he's using it for his own products and making tons of money.

1,500,000 new Macintoshes?

What a turnaround. Analysts were throwing bouquets at Apple's Chief Financial Officer, Fred Anderson, during Wednesday's media/analysts conference call. Earnings of $75 million compared to losses of $56 million a year ago. I remember last year's conference call when Apple was pleased it was ONLY $56 million and not more.

So Apple goes from losing a grand on each machine sold to earning a grand. Those super-hot G3 laptops that sell for over five thousand dollars earn Apple about a thousand dollars each.

But the multicolored logo guys are not out of the woods yet. Apple is selling fewer units than a year ago. Duh. What do you expect when they dump Newton, eMate and half the Power PC line.

The iMac as savior

How can a simple machine save a company? By rescuing its OS. The iMac, Apple's much lauded minimalist computer, comes out in a few weeks. Experts predict Apple will sell about 400 thousand of these stylish models this fall and another 400 thousand next year. What it means most to Apple is that it keeps the Mac format out in the marketplace.

Most of the sales of Apple's present machines are going to customers already sold on the Macintosh operating system. So far, Apple has sold about 750,000 of the new G3's. What Apple hopes to do with the iMac is introduce new customers to the Mac way of computing and raise the Mac OS share of the market.

It may be working. In school districts, Mac sales account for almost 40 percent of all computers purchased. That's a lot less than it was in the early days but five to six times higher than the market in general.

Apple is very coy about its next wave of consumer items due to follow the iMac. But if its stylish ways with the eMate and iMac continue, they should be fun, easy to use and easy on the eyes.

Surf on...

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