|by Wes George
Insanely Great Computers, Marketing By Morons
December 22nd, 1998
Its so hard to think straight this time of year what with Christmas, New years, and capital gains taxes all dancing like sugar plum fairies to the background music of bombs falling on Baghdad. As if that werent enough to rattle the markets, Congress found religion and impeached the President. The whole world seems to be going to hell in a handbag.
With this backdrop in mind, I have listed in no particular order some of the elements that loom large when trying to determine whether to buy or sell Apple this Christmas Season.
The Imatec Lawsuit:
OK, just a few facts about this bogus lawsuit to lay it to rest, forever. First of all, when reading about this scam in the mainstream press youll see Imatec referred to as a "research company" and about their "CEO" Hanoch Shalit as if were talking about a multi-million dollar publicly traded legit business operation. You will less likely see it mentioned that Imatec has only two employees, one of which has the grandiose title of Chief Executive Officer! Somehow, I imagine the both "employees" of Imatec have law degrees. Anyone want to bet me?
Imatec claims to have gross income of less than 100,000 bucks last year and theyre "based" in New York. I guess that means they have a PO Box number there.
Imatecs sole reason detre seems to be filing a 1.1 billion dollar lawsuit against Apple for stealing the patents to Apples ColorSync technology from Mr. Shalit way, way back in 1985. Questions remain as to which rock Mr. Shalit has been living under all these years to just have now noticed that those thieves at Apple have heisted his technology.
Apple plans to fight the case vigorously. Originally Imatec wanted to go to a jury trial on the issue. That was really just a ploy to scare Apple into coughing up a few million to make these clowns go away. But now when Apple has called their bluff and said a jury trial is just fine, CEO Hanoch (The Forgetful) Shalit says he regrets that the case will go to trial. Why is that, Hanoch? Perhaps the case is without merit.
iMac meets PowerBook G3 series; they make love and have a child. Hello WebMate.
A small translucent 300 MHz PowerBook with expanded network capabilities. Not due out of the maternity ward for a few more months, this baby promises to be 1999s mid-year homerun for Apple, much like the iMac was in 1998.
The latest round of PowerBooks, though streamlined as a nuclear sub, are ominous, forbidding looking creatures that weight in at about nine pounds. This is a bit heavy for hauling through airports and city streets. The Lexus crowd seems to love them, fortunately, since theyre the only ones who can afford them. WebMate will be for the rest of us. It will be much lighter than a PowerBook and translucent which make things feel lighter. It will be inexpensive which is great for growing market share. Market share, not high profit margins, is where Apple wants to go today.
Yosemite, as Im sure you know, is the code name for Apples high-end multimedia production machine that is going to be introduced at MacWorld in two weeks. Yosemites specs have been leaked and they are fiercely competitive. This tricked out G3 mini-tower package is destined to be a big volume mover even if it didnt have the Yosemites super cool iMac-inspired case.
Mac-based graphical business users have felt a bit ignored last year as Apples consumer iMac push seemed to dominate the news. High end users have been moaning for months about the limitations of the current crop of G3 minitowers. Yosemite is the answer to their prayers.
From an investors point of view Yosemite represents Apples recommitment to the high end market which seemed a bit shaky with those 3-pci slot, 233mhz G3 minitowers. With Yosemite on the market, there will finally be the technological incentive for production houses to upgrade from those old workhorse 8600 and 9600 PowerMacs. Off the record, I have heard Yosemite will flirt with an extremely low price range. Man, these are the cheapest dollar to power ratios ever in the Mac Universe!
Like the iMac and the WebMate, Yosemite would seem to be just one more homerun scheduled for next year. For all the investors sitting on the sidelines wondering if the iMac was just a fluke, the answer is a resounding NO. Apple is really back from the brink and next year will be a further extension of the gains in market share, and mind share made this year. All this technological superiority and rapid market share expansion could actually become boring by this time next year. I havent even mentioned QuickTime 4, Mac OSX, the Apple Portal, the Multi-Processor Capacities or all the other great software and corporate deals planned for next year.
There is a dark cloud over at Apple and it has nothing to do with the insanely great computers or the brilliant engineers or the world-class software. The biggest question for Apples future is can the management execute the current expansion flawlessly. History has shown that Apples business acumen sucks. Steve has come back home to change all that but has he been successful? Has he gone far enough with the radical restructuring of the management? Do the marketing leaders at Apple have a clue of what the issues really are for the end users?
Apples operations in Europe seem to be a miasma of everything that Apple has ever done wrong to sell their products. I just stumbled over this situation last week on the web and its kind of spoiled the recent rah-rah successes Apple has had for me. As an investor, I know that successes like the iMac are high profile while failures like shrinking market share in Europe are largely invisible. Its the unnoticed below the water line leaks that sink the ship. The iMac phenomenon will be over within the year; the lost mind share in Germany is forever.
Please read my column last week about how poorly Apple is managing its operations in Europe. I received a lot of feedback from European readers of The Mac Observer all who assured me that the situation is horrible. One German reader reported that Apple Germany had recently lowered the price of an iMac from 2998 Deutsche Marks (1803 US$) to 2499 Deutsche Marks. Thats still 1513 US$. He wrote that while watching an iMac commercial in a movie theatre, "The price tag (as shown in the commercial) was so high that the audience, well fed with info on computer prices by huge front page ads over here by the PC industry, merely started to laugh." Talk about losing mind share. Apple is the public laughing stock of Germany. The Dick Dale morons in Cupertino are so culture bound that they apparently arent able to effectively market the Apple brand in foreign countries. Either that or the Corporate structure they set up in Germany needs to be dismantled piece by piece until the problems are isolated and eliminated.
Another Mac Observer reader in Munich: Hagen reports "Mac is something 90% of Germans do not know about and if you go to an Apple dealer these days you can hear only cynicism because Apple just destroys (they say "reshape") the distribution channels. No one, not even the most loyal Mac users understand the policy of the company here. Advertising is invisible but what is needed is an aggressive marketing campaign that shows people that there is an alternative to Windows..."
A reader from Hungary wrote to let The Mac Observer know that the Hungarian Apple situation makes the fiasco in Germany look like a cakewalk. Apple has only a reseller representation in this rapidly expanding market space and they jack the prices on Macs 15 to 20 percent above the prices in Germany. Thus, an iMac in Hungary costs about 2,000 US$. Our man in Hungary goes on, "Apple Hungary spent US$40,000 total on iMac advertisements and marketing and they said all of this had to be carved out of their margins because Apple did not give a cent for this. There were absolutely no TV spots, no billboards...People in Hungary dont know a thing about the best-selling PC of 1998 and whats even worse, local resellers know only a little more than the people."
This is a sad state of affairs for a multi-national corporation. The Apple Computer Corporation cannot expect to gain the respect of Wall Street if they cant execute their business in Europe efficiently. The numbers may not be apparent today, but market share slippage in Europe, even as market share increases elsewhere, will come back to haunt Apple in unforeseeable ways. Shame on the suits in Cupertino for being so narrow of sight and mind not to realize the profoundly strategic importance of Europe to Apples long term future health.
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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.