While a new iMac has been expected for some time, Cupertino-based Apple Computer Inc. surprised many industry watchers when they announced late last week
a shortage of iMacs leading the company to suspend order-taking for the product. Apple called the iMac shortage “less than perfect” planning as it waits for the next generation of consumer desktops to hit the market. Industry analysts see the shortage as a significant problem for the company, but one they feel Apple can recover from if the new iMac follows Apple’s tradition blockbuster releases.
“It’s pretty significant when you consider the iMac’s lagging sales over the past year,” Technology Business Research Analyst Tim Deal told MacCentral. “iMac/eMac sales have dropped from 17 percent — 33 percent year-over-year each quarter this year. Apple needs to reinvigorate the iMac line with features and price points that will resuscitate its dismal sales figures — and the sooner the better.”
With the new iMac not scheduled for release until September, Apple will miss out on desktop sales they normally receive during the back to school shopping season. Most institutional purchasing for the 2004/2005 school year has already been completed, but analysts see the back to school season as an important period for Apple to reach out to consumers.
“Clearly this is an important season for them with education being such an important part of their market,” said Ross Rubin, Director Industry Analysis, NPD Techworld. “It’s incumbent upon them to have something for the students, faculty and staff during that time. Apple is trying to win market share in education, but it’s going to be hard for them to do that without having product for students to purchase.”
The lack of iMac sales may not be as hard on Apple as it once was as notebook sales continue to be strong. The company’s consumer iBook notebook or even its higher-end PowerBook could be the beneficiary of lost iMac sales. Even with that, the iMac is an important part of Apple’s overall marketing message to consumers.
“We’re definitely seeing more of the market move to notebooks and more of Apple’s computer revenue is attributed to notebooks,” said Rubin. “That said, desktops are still very important, particularly in the home — you can’t have a digital hub strategy without a digital hub.”
For the second fiscal quarter of 2004 Apple sold 217,000 iMacs and eMacs totaling approximately $252 million in revenue — a decrease of 15 percent year-to-year. However, in the same quarter Apple sold 201,000 iBooks worth about $223 million in revenue, up 51 percent year-over-year. While the trend is certainly moving toward notebooks, recent expectations for a new iMac may have also contributed to slower than normal sales.
“Customer anticipation for an iMac product refresh made the existing model a lame-duck product anyway,” said Deal. “It will be difficult for the company to recoup those losses in the next quarter.”
Blockbuster iMac release to the rescue
Even though Apple will be without an iMac for two months plus, analysts are unanimous in their opinions on how important the next generation machine will be for the company.
“If they release a superstar product in September I think it would go a long way toward overcoming the lateness,” said Rubin. “Certainly, the track record shows that the new iMac designs tend to do very well out of the gate.”
Apple introduced the first
15-inch flat panel iMac to rave reviews in January 2002, but the company was unable to capitalize on the early demand because of
component issues. There have been other such delays with other products since; a problem analysts insist cannot happen to the upcoming iMac introduction.
“Apple has a long history of missing planned product release dates, usually as a result of its inability to secure key components,” said Deal. “It is possible that Apple plans to release iMacs with G5 processors in September, and IBM was unable to meet Apple’s heightened PowerPC G5 processor demand in the wake of the all-dual processor Power Mac introduction. It is unfathomable that a company would plan so poorly.”
Looking beyond the September introduction of the iMac, NPD’s Ross Rubin sees the holiday season as the next big buying period that Apple has to plan its supply channel for.
“As long as they have a good supply toward the holiday season — and it sounds like there will be enough leeway in the channel — that is more important strategically for a desktop computer,” said Rubin.
Never underestimate Apple
Despite the financial hit that Apple will take in lost sales over the next two months, Deal never counts Apple out.
“I believe Apple has some real opportunity in the lower-end desktop market, if it can combine competitive prices with its trademark design superiority,” said Deal. “Over the years, I have learned to never underestimate Apple’s ability to turn poor sales around on the wings of one innovative product launch.”