Apple hopes iMac is its comeback kid The company that introduced the Mac needs another winner

First new product in 3 years

Improving prospects already reflected in recent profitability

August 16, 1998|By Michael Stroh | Michael Stroh,SUN STAFF

History has a way of repeating itself. And computers are no exception.

Fourteen years after Apple Computer Inc. unveiled its revolutionary Macintosh personal computer, the company launched its progeny, the iMac, yesterday. It's the company's first new consumer product in three years, and some industry watchers think it could be Apple's most significant computer since the original Mac.

"It's an important product for Apple because it's a major piece in their comeback story. And it has a little bit of old Apple magic about it," said analyst Bruce Stephen of International Data Corp. in Framingham, Mass.

Last year, Apple's financial health looked rotten. Its stock price fell to $12.75 a share, and the company reported losses exceeding $1 billion. Takeover rumors swirled. Even educators and longtime Mac users, so loyal they make Elvis fans look listless, started to defect, dragging Apple's market share below 4 percent.

Today, from the classroom to the boardroom, Apple is charging back.

It has had three straight profitable quarters, and its stock value has more than tripled, closing Friday at $40.50, up $1.0625. And mutual fund giant Fidelity increased its stake in the Cupertino, Calif., company to 12.29 percent last week from 5.75 percent of outstanding shares.

The company hopes the iMac will further cement its relationship with its 10 million Macintosh users and maybe attract some new ones.

It's Apple's first low-cost computer, and it has considerable silicon muscle. The computer contains a speedy 233MHz G3 microprocessor, a 15-inch monitor, a 56K modem, 24X CD-ROM, stereo speakers and Ethernet networking technology -- and a price of $1,300.

Steven P. Jobs, Apple's interim chief executive officer, has orchestrated a $100 million advertising blitz -- its biggest -- to ensure that the iMac doesn't get put on store shelves unnoticed. It has worked. The machine has been something of a silicon pinup since it was unveiled in May, making splashy cameos even in magazines such as Details and Rolling Stone.

Jobs said last week that Apple had 150,000 orders for the machines nationwide, sending the company's stock price soaring as most stocks fell. Apple estimates that it will sell about 800,000 iMacs this year, and industry analysts generally agree.

CompUSA, the only major nationwide Apple retailer, has been bracing for big crowds seeking Apple's new product.

"We've never seen this type of excitement from our customers surrounding a new PC," said CompUSA CEO Jim Halpin, who added that the iMac could become the chain's best-selling computer ever.

Apple also seems to have recaptured educators, some of whom began to have second thoughts about the company last year. Along with home users and graphic designers, educators have long been one of Apple's core markets.

"There were quite a few people here who had doubts about where Apple was going. They were on shaky ground here," said Bill Brawley of Dartmouth College's computer services department. After dropping Apple in 1997, Yale University put the company back on its recommended computer list for incoming freshman this year. Dartmouth, which requires students to have computers, went further, strongly urging its incoming freshmen to buy iMacs.

It remains to be seen whether the machine and the splashy media attention swirling around it can boost Apple's still-sagging market share by drawing new computer users and PC converts, which industry analysts say is critical to a turnaround.

"You can only ride the Mac community for so long," said analyst Tim Bajarin, a longtime Apple watcher and president of Creative Strategies in San Jose, Calif.

Apple must also win over software developers, especially ones who make games and other titles that tend to sell computers.

It could be a difficult battle for Apple.

Last spring, Intuit Corp. announced that it would no longer make new versions of its widely used Quicken personal finance software for the Mac. The company reversed its decision a few weeks later, but only after Jobs lobbied the company.

Lucas Arts Entertainment in San Rafael, Calif., stopped converting its popular Star Wars computer games to the Mac format last year and has no plans to start again.

"I think from an economic standpoint it doesn't make sense for us to continue for now," company spokesman Tom Sarris. "Certainly, people are rooting for Apple and for the market to come back, but we're cautiously optimistic."

Last week, Apple trumpeted news that 460 new or upgraded software applications had been announced for the Macintosh since the iMac was unveiled in May. But some industry analysts say many of the programs are updates of existing software products.

Even if the iMac proves a runaway hit, analysts say it's unlikely Apple will ever again approach the summit of the computer industry, as it did in the early 1980s when the Macintosh was born.

"I don't think a lot of businesses and individuals that have left the Mac are going to come back," said International Data's Stephen.

That might disappoint those who have hoped for an Apple comeback, but analysts said toppling the Windows-based PC is no longer important to Apple's future.

"Apple can still be profitable and successful as long as they continue to do things right," Bajarin said.

Pub Date: 8/16/98

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