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by Wes George



and Trading.

Mmmmmmm...... Good

Uncertain Mac Market
December 7th, 1998

It’s that time of year again folks, mere weeks away from the end of the first quarter. Christmas is looming large and yet another MacWorld is highlighted on next month’s calendar. Naturally, mums the word from Apple on all things future. AAPL is drifting sideways with a slightly downward angle. Nothing to worry about, the technical analysts call it forming a base. The stock is bidding its time while waiting for the big news out of Cupertino on what’s up for 1999.

The downward drift in stock value is the result of speculators and fast money people who are unable to resist yet another round of hoopla and headlines over in the .com section of the market. Even the exciting sales figures of the sexy iMac are over shadowed by the thrilling roller coaster ride the Internet stocks are providing for the more foolhardy investors. Nor does it help that Dell, Gateway and Compaq aren’t having an exactly stellar quarter. That tends to undeservedly drag Apple down with the PC box maker fold.

I can’t say it enough: The market hates uncertainty. That’s exactly what we have with Apple now. Can Apple come up with killer new products for 1999? Investors, always nervous, want to know. Is the iMac just a lucky shot or is it the beginning of a new Apple? The cards aren’t all on the table yet. The fat lady has yet to sing.

These doldrums will likely continue until Apple makes some big new product announcements at MacWorld in January. There are huge rumors in circulation out there available at your local Mac website as to what those new products will be, so I won’t bother offering my own version of the myths.

Except that I can’t resist mentioning that recently Lucent announced that it has released a WaveLAN networking card, "designed for a new industry-standard wireless local area network (WLAN) protocol" that "is now available for a wide variety of Apple computers, including the latest PowerBook G3 series."

Can you say, "Apple’s secret wireless Internet strategy"?

I expect things to start to rock with Apple’s new ad campaign scheduled to launch during the upcoming Super Bowl. There is heated speculation on what the content of this TBWA/Chiat/Day created spot is going to be. After all this will be Apple’s first Super Bowl ad since 1985. You might even remember Apple’s "1984" ad produced the year before. Adweek calls it the most famous Super Bowl ad ever. That’s quite a legacy to live up to. If ever there was a year and a cause to top that campaign, 1999 and the dawning of the new post iMac product cycle is it. By the way Super Bowl ads are running at 1.6 million bucks for a 30-second spot this year and space is sold out so those Apple spots better be killer or Steve’s going have somebody’s head on a platter.

Most Apple investors are a bit miffed by the stock’s recent under performance. After all everything is going Apple’s way. The iMac "earned top spot with consumers in October for the third consecutive month", reports ZD Market Intelligence

That’s not all, according to ZD’s Matt Sargent with Apple’s introduction of the iMac in August the average overall selling price of an Apple computer fell about 600 bucks to come roughly in line with the average selling price of the big PC manufacturers like Compaq and IBM. Apple prices overall are still a bit higher but obviously not enough to slow iMac sales.

Matt’s whole premise is that the new low cost of owning a Mac system is what’s driving the massive iMac sales and the subsequent rise in Apple’s market share which has more than doubled since June.

Matt goes on to say that, "If Apple introduces a low cost iMac in 1999, as has been announced, we may see the iMac continue to proliferate and possibly even start to take a chunk out of the Wintel vendors." Matt is no starry-eyed Mac head, he’s a PC software and Hardware Analyst, whose words were composed on a Wintel machine.

Let’s hope Matt is wrong about a price drop for the 233mhz iMac in 1999. We want cheap iMacs now for the Christmas season! To hell, with high profit margins, we want more marketshare. I’m sick of hearing about how overpriced and elitist Apple products are. Don’t those suits in Cupertino know it’s all about cash-flow not high margins on low volume? Maybe Steve ought to have Michael Dell over for the night instead of the Clintons next time. Of course, if Apple is already selling iMacs faster than they can make them then dropping the price isn’t going to help market share any. However, my research suggests that Apple has been able to keep the channels well stocked for the Christmas season.

So why hasn’t the stock price doubled since June? The same ZD Market Intelligence web site in October was predicting an early end to the iMac phenomena, largely due to the face that it was too pricey for a computer with no floppy drive. Dudes, make up your minds.

There have been other overblown dark news like that "push technology pioneer" Pointcast discontinuing it’s service for the Mac platform. Losers. They have less than a few hundred thousand users because their product sucks. Yet, the story made all the major news wires. Apple, of course, always has plenty of PC borgs waiting in line to slander her. Such as that pinhead columnist Herb Greenberg who slighted Apple as "losing its shine again, blah, blah, blah" and spread false rumors that the iMac wasn’t selling well. Moron. It must be pay back for Avadis Tevanian testimony in the Microgate trial.

There is more uncertainty introduced by the Imatec lawsuit against Apple. Imatec claims they hold the patent on some parts of the ColorSync software that Apple has been using for more than a decade to ensure that print documents match the colors shown on the designer's monitor. Imatec’s Rip Van Winkle Lawsuit seems to be coming at a suspiciously late point in time. It's a billion-dollar lawsuit that could go either way. I hate lawyers.

By the way, Steve, it’s totally uncool that Apple is still stuck at 333mhz for the top’o the line G3 towers. I don’t care if it’s as fast as a 400mhz Pentium whatever, try explaining CPU benchmarking details to the company bean counter who only sees bottom lines. We can only hope that Apple has some darn good reason unavailable to us outsiders for why we don’t have a 400 MHz G3 out on the market in time for Christmas. Especially, since we suspect next year at this time we will be talking about a gigahertz CPU. It’s an embarrassment.

The times they are a changin’. The iMac success has become an old hat trick already calculated into every equation. It is time for Apple to think different and revamp its business model in radical ways to fit the new realities of the emerging online information based economy.

The AOL purchase of Netscape and alliance with Sun is a harbinger of the future. Just as AOL sees multi-billion dollar potential in expanding its web-based business into hardware and software alliances, Apple needs to create a convergence of its hardware/software business with the net. Apple’s main base of operations is slowly shifting netward with the Apple store, but it’s not gone far enough.

Perhaps Apple needs to create it’s own web portal outfitted with Mac-orientated firmware working with Sherlock, WebObjects and QuickTime. Apple redefined as, the net services, software and hardware end to end solution would be in ship shape to sail into the uncertain waters of the 21st century.

Like AOL, Apple needs to create new Alliances; much like it did with IBM and Motorola in the past to develop the PowerPC chipsets. Only this time it needs to be a diversification process into web-based services and more cool software Like Sherlock and WebObjects. Apple has the hardware momentum in place with the G4’s coming on and the many hip possible permutations on the iMac/PowerBook theme.

But the hardware market is going to continue to see a dwindling of profit margins as Apple is forced to compete head on with the price and profit slashing techniques of the PC box makers.

Of course, one company can’t be all things hard and soft to all end users. Apple needs some new friends. Especially once the expanding Mac market share grows to the point of attracting the attention of the Microsoft axis whom at this point can pretty much decide who lives and who dies even under the watchful but impotent eye of the feds.

Your comments are welcomed.

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Wes George writes about the financial side of being a Mac nut. Wes has followed Apple's finances for the last 7 years and comes to The Mac Observer every Monday to tell all about his opinions. He is, in his own words, "inordinately fond of money." If you would like to write Wes, make it nice. Someday you might own a company that has something to do with Apple, and Wes will probably still be writing for The Mac Observer...... On the other hand, Mr. George is known to love a rousing, hair-raising debate, so send him your worst!

Disclaimer: This column is for informational and entertainment purposes. While Mr. George may be sage indeed, his writings can not be construed as a solicitation to buy, nor an offering to sell any particular stock. As with any trading in the financial markets, you must use your own judgment to make the best trades that you can. Neither The Mac Observer nor Wes George may be held accountable for trading advice.

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