Pundits predict lower prices, alternate iMacs at MacWorld Expo
by Elinor Mills
(IDG) -- Apple Computer will be able to bask in the glory of its rising market share and healthy earnings at MacWorld Expo in San Francisco in early January, a far cry from the uncertainty that surrounded the event a year ago.
"I think the biggest event is Apple is not dead," said Pieter Hartsook, an independent Macintosh industry analyst in Alameda, California, when asked what the big news will be at MacWorld Expo 1999.
"They're dominating certain segments of the market with their products. They've got leading-edge technology," Hartsook said. "What's interesting is the question that's not being asked, which is 'Is Apple going to survive?' This was the question that was on people's lips every day in past years."
In October, the company announced its first profitable year since 1995, reporting earnings of $106 million, or 68 cents per share. And Apple stock has been trading in the mid-$30 range, roughly twice the $18.93 it reached after interim CEO Steve Jobs predicted a return to profitability during last year's Macworld keynote.
Apple's turnaround was listed as one reason the personal-computer-industry outlook is rosy in a study released last week by Deloitte Consulting. Short-term optimism is high because of new channel strategies, primarily e-commerce, as well as the industry’s realization that the Asian financial crisis is not going to greatly affect the PC industry, according to the Deloitte study. Apple's rebound was cited as the "single biggest contributor to the increasing trend in the Hope Index," a measure of investors' long-range expectations.
Credit to Jobs, iMac
Observers attribute the turnaround to Jobs, interim CEO since September 1997, and to the innovative iMac computer introduced in August.
"Steve Jobs has re-invigorated and re-energized the Macintosh world and specifically the Mac employees and given them hope and a vision," said Tim Bajarin, president of Creative Strategies in Campbell, California. "He's also delivered on much of what he's promised." Bajarin counts powerful desktops with the G3 systems, a new consumer product with the iMac, and new portables with the G3 PowerBooks among Apple’s 1998 accomplishments, he said.
But can Jobs be interim CEO indefinitely?
"I don't see why not. I don't think any of the board members or any of the stockholders are complaining at this point," Hartsook said.
Meanwhile, sharing the limelight with Jobs is the iMac, which was deemed the most popular desktop model in the United States in November, research firm PC Data recently announced. The iMac gained 7.1 percent of the retail and mail-order business, giving Apple a 10 percent share in the U.S. retail market--up from 5 percent or less before the computer came out.
Bajarin sees the iMac as an indication of where Jobs is headed in general with the company.
"His next legacy will be in industrial design," Bajarin said. "Just like he defined what personal computing was in the early '80s, I think he sees that his next major responsibility in leadership and life is to show people what the computer of the next 20 [or] 30 years will look like.
"The iMac was the first stab at that," Bajarin added, saying the second will be a "consumer-portable" version of the iMac.
A newer, faster version of the iMac is expected to be announced in January, possibly at the Macworld show, according to analysts. But a portable version is unlikely to appear that soon, although it is slated for arrival in early 1999, they said.
"I'm hoping to see more information on the consumer portable," Hartsook said, adding that Jobs' secrecy about product plans is notorious, if frustrating.
With the introduction of a new iMac, analysts predicted the company is likely to drop prices on the existing iMac. And drop prices Apple must, they concurred.
"We would all expect them to lower the iMac price if they're going to refresh the line and make a newer version of the iMac more powerful," said Bajarin. Apple must be more aggressive with its pricing to compete with rivals offering sub-$1,000 computers, he noted.
"When the new iMac is introduced we'll see street prices of existing systems drop to $999 to break that $1,000 barrier," Hartsook speculated.
Several retailers announced price drops on iMacs this week, analysts noted.
"It could be in anticipation of Apple dropping prices," said Schelley Olhava, an associate research analyst at International Data, in Framingham, Massachusetts. "To keep the momentum going Apple is going to have to decrease the price of the iMac," which is typically priced just under $1,300.
Apple must also define a strategy for its operating system and offer multiprocessing systems, according to Hartsook.
"We haven't heard much about Mac OS 10 (the next-generation operating system) lately," said Hartsook. "I also have some concerns about their server and multiprocessing strategy." Although single-processor Macintosh systems outperform their Intel-based rivals, he said, Apple needs to provide a long-term multiprocessor strategy.
Bajarin listed new users and more applications as primary needs of Apple.
"They need to expand their user base. All Steve has done is repair the rift between the existing user base and Apple," Bajarin said. "He's been able to keep small businesses and consumers he already had from jumping ship, but at the same time he's going to have to find a way to draw in many new users to the Mac platform if he wants to be a long-term player."
Those new applications may start coming at MacWorld Expo. At least Apple won't have as much trouble getting companies to offer updates to existing software. For instance, Microsoft is expected to announce Internet Explorer 4.5 for the Macintosh at this year's event, according to sources.
Meanwhile, at least one vendor exhibiting at MacWorld announced plans to unveil products at the show. Hermstedt said it will launch a USB (universal serial bus) ISDN connectivity device for Mac users as well as its Primary Rate ISDN connectivity card.
The big news at MacWorld Expo 1998, besides an expected return to profit, was the company's announcement of Mac OS 8.1 and Microsoft's announcement of Office 98 for the Macintosh.
Within weeks after the show, Apple reported earnings of $47 million, or 33 cents per share, for the first quarter.
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