Five hours of in-depth details of
Apple operations from Wednesday’s analyst meeting in Cupertino, Calif. brought out heretofore publicly unknown news about the company’s plans to return to profitability beginning this quarter. MacCentral brought readers details of much of the presentation with Wednesday’s news. Here is a bullet point recap of the main points brought out by the four main presenters, beginning with Apple CEO Steve Jobs:
Steve Jobs — Chief Executive Officer
SuperDrives will come to consumer Macs sometime in 2002. “I think we have to make enough of them and bring the cost down,” Jobs said. “When they are available in high enough volume and manufacturing becomes cost-reduced enough to put into consumer products … I expect (that) will be next year.”
Orders have been good for the recently introduced
G4 PowerBook. “The orders have been very gratifying,” Jobs said, although did not give numbers of existing orders.
Apple plans to begin shipping its
high-end Power Macs, as scheduled, late this month. “We’ve seen a very good order rate for the Power Macs as well,” Jobs said.
Mac OS X is still on track for a March 24 final release. “We think strategically it is the most important thing we’ll do this year,” Jobs said.
Expects most customers to switch to Mac OS X this year, but many will wait or not need its features and power. “I’m often asked, ‘When should I switch?'” Jobs said. “There’s no one answer. It all depends on what apps you use and when they’re Carbonized. When enough are Carbonized, that’s when you should switch.”
Would not comment on reports that Apple plans to open a retail chain. “I can’t talk about initiatives we haven’t announced yet,” he said.
When asked what he thinks went wrong for Apple over the last six months, Jobs responded, “I think the economy is melting down. That’s what I think has gone wrong. We don’t know what macro economic hand we’re going to be dealt this year…Fortunately, we not only have a loyal customer base but a segment of that is a pro customer base and hopefully they will hold up better than many.”
While admitting
G4 Cube sales have been disappointing, the Cube still has a market. “It’s smaller than expected, but is a definite market,” Jobs said. “We’re very pleased with the Cube.”
Internet appliance devices are not something Apple is spending much time thinking about because the current crop of such devices may prove disappointing in the long run. Saying the “general purpose nature” of PCs to “adapt and move and grow and expand” are the reasons Internet appliances are succeeding. “The intrinsic value and capability of the personal computer will start to shine again,” said Jobs.
Mac customers are willing to pay a little more for a better product. “It costs a little more to build a better product,” he said. “Our customers have signalled us that that’s the product they would really like to buy … Our goal is not to be the cheapest PCs in the market. Our goal is to be the best. And if we have to be 10-15 percent more expensive sometimes, then we will be.”
Phil Schiller — Vice President of Worldwide Product Marketing
Confirmed G4 PowerBooks began shipping this past Monday.
Apple is on track to deliver the high end Power Mac G4s sometime end of February, although they will be “constrained for the whole of the current quarter.”
Although independent companies have Apple’s market share at around five percent, Apple is more interested in looking at individual markets like graphics, education and publishing. He would not give market share targets for these sectors.
It’s important to kill the perception that the Mac doesn’t have as much software available for it as Windows-based PCs. Working with retail and mail-order outlets to offer more software selection will help kill this myth.
Mac OS X will help to narrow the gap of compatibility with Windows systems. A primary example …
Microsoft Office 2001, which is cross-platform compatible.
There are 25 million Macs worldwide, with over half of those capable of running OS X. Saying OS X “is a very unique (upgrade) situation,” Schiller hopes for more users to upgrade to OS X than they did for OS 8.5 or 9.
Tim Cook — Senior Vice President of Worldwide Operations
Apple did 12,000 Demo Days worldwide last quarter and plan on expanding the program “more formally” to present solutions face-to-face. Cook said Apple is pleased with the Demo Day model and plans on strengthening it domestically.
Apple wants to add more distribution options internationally and to improve its sales efforts domestically. As a result, “We’ll cut some channel partners that may not be providing the buying experience,” Cook said, while other areas will be expanded.
Apple plans to place a greater emphasis on selling hardware and software solutions rather than just “boxes,” which have lower profit margins.
Saying, “We’ve had a lot more success here in the US than we have internationally,” Apple is working on its international infrastructure to boost its online sales efforts overseas and mirror much of the same marketing plans that have been successful domestically.
Having to re-educate 40 percent of its educational sales field force, it was “a rotten time” to make the switch to inside educational sales. Regardless, fiscal first quarter educational business has been “stabilized” and the coverage model is now being “fine tuned” to sell solutions and not boxes. “We are not going to rest until we get back on top in education,” he said.
Noting that one-third of its sales came from
online Apple Store sales in the fiscal first quarter, online sales growth is a primary goal, especially overseas. Driving re-sellers and educators to buy online is an additional goal.
Mac build-to-order systems are being manufactured in three days, 83 percent of the time, compared to competitors at five days. The goal … same day turnaround.
Worldwide channel inventory goal … less than four weeks.
Apple will benefit from lower component costs in the current and next quarter, as such things as memory continue to be at good, competitive prices. Components, such as capacitors, are now more readily available as demand for cellular phones has eased.
The price of flat-screen monitors continues to fall, as prices get closer to traditional CRT monitors. Cook is concerned the gap will lead to “dramatic price elasticity,” and as a result, demand will pick up significantly.
“We would investigate putting people in stores on a more permanent basis,” Cook said, when asked about fulltime employees at CompUSA stores, although he said, “we haven’t made a decision to do that.”
Fred Anderson — Chief Financial Officer
There is clearly an economic slowdown in the U.S. and Apple is “buttoning down the hatches and we’re going to manage through this profitably as a company”.
Apple is on track to reach its goal of a slight profit this quarter, and expects to see progressively increased profits and revenues in the third and fourth quarters.
“We also believe strongly that we can drive substantial improvements going forward,” he said. “Gross margins definitely have to be rebuilt above 25 percent. Operating expenses have to be cut to around US$300-US$400 million per quarter.”
In the next two quarters, the goal is to make its revenue base at or above $1.5 billion per quarter, or $6 billion per year.
Apple is looking to cut costs, not jobs. “We are not planning an across-the-board layoff,” he said. “Because we are an innovator, our most important resource is our talent … We don’t want to mortgage the future.”
For more information about what was said at yesterday’s analyst meeting, MacCentral readers are encouraged to check
our comprehensive coverage for Wednesday, Jan. 31.
