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October 15th, 1999

[Editorial] Has Apple Shifted From The High End To A Low End Focus?
by Kyle D'Addario

The G4 situation.

OK, so let me get this straight. Apple announces a smoking new line, at three different price points, and tells us the machines are shipping soon, if not immediately. Then, they tell us that some of the machines are indeed NOT going to ship for months. Shortly after, word spreads that the top line version of the G4, the 500 MHz model, does not actually function due to a flaw in chip design. Lastly, Apple decides to keep the three tiered pricing system, at the originally announced price points, but the processor in the machines is going to be downgraded by 50 MHz across the board.

Did I miss anything?

Something crazy is going on in Cupertino, that is for sure. Perhaps the G4 fiasco is due to Apple being wrapped up in the iBook and new iMac models. Lets explore this option for a minute. The complete lack of stability and preparation in introducing the G4 line, while the iMac line is fine tuned with clockwork precision, reinforces Apple's newfound love for the consumer market. At the same time, this attitude amplifies the disinterest in the professional and high end. This approach is unlikely, as the high end machines are the big margin items, and that is where Apple REALLY makes its money. But, it is possible that even Apple is starting to listen to the world's cry that market share is king.

G4 boxes do not mean market share, iMacs mean market share.

There is some validity in that argument, but it is against much of what Apple has worked to achieve during their rebirth. Most of Apple's turnaround has followed the line of thought that the iMac will bring the OS to the masses, but the people we REALLY care about is the graphic professional. Much of their marketing has pushed this point. The appearance of iMacs on many of the primetime "kid" shows has given us the impression that the Mac OS is "cool" and is a viable option for use by the masses. However, the B&W G3 machines are marketed to an entirely different population, the all-important high end user; the ones that REALLY matter.

The G4 fiasco has changed this.

The consumer user is happy as a lark, with not one, but three, new iMac models to choose from. Wall Street seems to agree. In the last two days amidst the announcement of better than expected earnings, the new iMac models, the shipping of the iBook, AND the problems with the G4 line, Apple's stock has skyrocketed. At this writing, Apple stock stood around 74, which is nearly 15 points better than the recent low. The significance of that is far reaching. Analysts and investors are basically conceding the high-end market, while rewarding Apple for a renewed consumer strategy. However, the average user did not make the Mac great, the high end user did.

Apple will alienate the very group of people that stuck with them during the difficult times with this latest manipulation of the G4 product line. Having the nerve to announce a product at a certain price, sell it for that price, and the downgrade the product while maintaining that same price is a tactic that no company would be able to get away with without having a PR nightmare. Apple, constantly under the microscope, will come out even worse that the average company. There is no amount of positive PR that can turn this around. The high end users that have been holding out for these systems are now going to feel as they are being overcharged for a product that is not going to be available for months. Also, why would somebody purchase a 450Mhz system knowing a 500Mhz system is on its way into the pipeline.

The result of this is that G4 sales are going to suffer, but more importantly, so is customer loyalty from the high end. And, when all is said and done, there are not enough iMacs in the world to fix that.

Apple



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