The iMac Channel

iMac Saves Apple?

26 December 1998 - Dan Knight

Charles Piller, in Fast-Selling iMac Model Is a Singular Sensation for Apple, writes:

While the sensational new iMac has doubled Apple Computer's share of the consumer PC market to about 10%, according to the latest data, so far the popular machine has no coattails. Sales of Apple's more costly and capable G3 desktop computers have remained sluggish....

Fact #1: Apple has been running factories worldwide at nearly 100% of capacity since late July or early August to meet demand for the iMac, which is selling as fast as Apple can build them. (See Making iMacs every second of the day, Apple)

Fact #2: Apple's own online store has been out of the Power Mac G3 for several weeks. Apple has sold all it could build. (See Apple Store sold out of most Power Mac G3 models, Macs Only!, 12/14/98)

Fact #3: The iMac has been the best-selling computer in the U.S. for the past four months - and will probably retain that position for December. (See iMac #1 for fourth consecutive month, MacTimes.)

Fact #4: Although the iMac targets consumers, businesses are buying them. My employer has just ordered one, which will become our web server, for many of the reasons noted in iMac, the cheapest web server available. Other businesses are deploying the iMac, the ideal networked computer, in areas where the tiny workhorse shines. (See iMac lives up to buzz, Federal Computer Week.)

Fact #5: Many buyers who otherwise would have bought a Power Mac 4400, 6500, or G3/233 are instead buying the iMac. Thus, sales of Power Mac models should be expected to decline slightly.

Fact #6: Before the iMac, Apple had 4-5% of the total personal computer market. If Apple is at 10% today, as Mr. Piller notes, then 3-4% of all personal computers being sold are Apple models other than the iMac: the PowerBook G3 and Power Mac G3 - the only other models Apple offers since discontinuing other consumer computers to make room for the iMac.

Conclusion: Apple has at least doubled market share since August 15, 1998, and the only negative spin Mr. Piller can put on this is to note that sales of Apple's more powerful, more expensive Power Macs haven't increased. That's like complaining that sales of the New Beetle haven't helped sales of other VW models. Fact is, the company is selling the new model as fast as it can make them, increasing market share, and growing profits.

So what if older models aren't doing as well as the hot new one.

"Without the iMac, Apple would have lost further market share," said Roger Lanctot of PC Data in Reston, Va.

This is pure speculation. With the G3/233 available for about the same price as the iMac (sans monitor), Apple could have sold a lot more Power Macs to owners of older Macs and new computer buyers if the iMac hadn't been available.

So Macintosh fans and analysts alike wonder what Apple will do to maintain the iMac's momentum and extend its popularity to other products.

Web-savvy Macintosh fans know what Apple will do for an encore, as does Mr. Piller. (He mentions them later in the article.)

In the coming weeks, Apple will announce new models at MacWorld San Francisco and celebrate the 15th anniversary of the Macintosh. We're all expecting:

  • Price on the iMac should drop to $999 in January or February.
  • A new 300 MHz iMac at the $1,299 price point, giving iMac fans two models to choose from.
  • A new line of business Macs (code name Yosemite) with 300-400 MHz G3 CPUs, 64 MB RAM, a 100 MHz system bus, 3-4 PCI slots, and prices starting under $1,700. Plus styling that tips the hat to the iMac.
  • Fresh looking new monitors, plus better LCD displays at more accessible prices.
  • A consumer handheld computer or two.

And there may be even more in store.

Fact is, business users try to postpone buying new Macs between late-October and early-January, awaiting new product announcements from MacWorld, along with price drops on existing models.

Thus, Apple's retention of 3-4% market share for non-iMac computers is a very impressive accomplishment, especially with the iMac "stealing" sales from the low-end Power Macs. (I've recommended several friends go iMac instead of Power Mac, adding an external monitor and faster computer as necessary in the future.)

Apple's 10% market share, while a dramatic improvement, still trailed market leaders Compaq Computer, at 27.3%; Packard Bell-NEC, at 22%; Hewlett-Packard, at 19.9%; and IBM, at 11.8%. Those companies have enjoyed strong sales in the fast-growing sub-$1,000 PC market.

Having used the sub-$1K Compaq Presario, I know two truths:

  1. The sub-$1K price often passes the $1,000 mark when adding a decent 15" multiscan monitor, such as the one built into the iMac.
  2. The poor performance and user-unfriendliness (at least in the eyes of one used to a Macintosh) could well sour users on ever buying another computer, Wintel or Mac.

Once Apple drops the Revision B iMac to $999 and figures out how to produce enough of both models to meet demand (Apple's biggest problem is the runaway success of the iMac combined with limited production capacity), expect them to coast past IBM and move into the 15% range. The PowerBook G3 and Yosemite Power Macs will also contribute to growth of Macintosh market share.

So analysts view some improvements as critical to continuing the iMac's impressive run.

Seriously, Mr. Piller, the entire computer industry depends on ongoing improvements to maintain market share. What if IBM, H-P, or Compaq had decided 300 MHz was fast enough and refused to make faster models? I imagine market share would take a nose-dive and stockholders would drive out management.

The entire computer industry is predicated on two facts: everything gets faster and everything gets cheaper. Today's speed leaders will be considered pedestrian in six month and outdated in twelve.

Apple and everyone else knows that.

The iMac has also helped generate demand for peripheral devices such as printers and floppy disk drives. "It gave Apple something to talk about. Before the iMac, there was no hot box to get people into the stores or onto the Web sites," Lanctot said.

If any computer can be given credit for making USB take off, it is the iMac. Funny thing is, it's a Wintel invention that's been used for a year or more on Windows PCs, but there was no compelling reason for anyone to actually make USB peripherals until the iMac forced the issue.

The iMac isn't the be-all and end-all of personal computers, as the January product announcements from MacWorld will make clear. It did provide Apple with an incredible, much needed shot in the arm.

But don't forget that Apple had three consecutive profitable quarters before the iMac shipped. The company had turned the corner under Steve Jobs' guidance - and, having turned the corner, is accelerating into the new year.

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