The iMac Still Has No Competition
June 21st, 1999

Gateway? NEC? Who's that?

Last week, Gateway and Packard Bell NEC Inc. independently announced new all-in one computers. Even the mainstream press perceived this move as a reaction to the iMac's success.

The media got it wrong, however, when they compared these new all-in-one designs to the iMac. Gateway's 'PC in a monitor' is a bland beige and economy class in appearance with none of the iMac's flash. While the NEC Z1 incorporates slick design elements, it's too cold and arid, like something out of the movie 'Gattaca'.

These new PCs, especially the NEC model, borrow their inspiration from the obscure 20th Anniversary Mac. A bit of history: the 20th Anniversary Mac didn't work out well. Apple lost money on the computer, which was, and still is, the bane of tech support specialists at Apple. As usual, Apple straddled the bleeding edge of design technology with the 20th Anniversary Mac and was ahead of the profit curve as well.

It was a cunning end around to emulate the design of the 20th Anniversary Mac instead of the iMac. Touché. The average consumer will think that these gutless PC wunderkinds are oh, so clever, and original. With just over 11,000 20th Anniversary Macs shipped (11,601 to be specific), few people have ever seen one in real life, much less heard of it.

Perhaps both Packard and Gateway feared a more blatant iMac-style rip-off might have turned into a free endorsement for the iMac, like just another unsolicited MTV video with iMacs swirling in the background. The reverse designers will claim that they didn't rip-off Apple. After all, the 20th Anniversary Mac wasn't an all-in-one computer, it merely looks like the new PCs. It's a simple case of parallel evolution leading to a convergence of form. Right.

Interestingly, both the Gateway and the Packard machines are priced at $2,250 and $2,500 respectively. This further emulates Apple's tactic of courting the well-heeled consumer. They have finally realized the ongoing battle of profit attrition at the low end is one in which all lose.

Their target market for the new all-in-ones center on status conscience business executives--hardly the same demographics as the iMac, certainly not as large. They'll be competing with each other, rather than the iMac, for a market space that may not be big enough for either. A price war will probably break out between the two. Wait a month and these things will be going for under two grand.

First reactions and second thoughts

We can safely say that AAPL's recent flaccid performance was due in part to the all-in-one PC news scare. It released an urge to take profits among the ranks of more skittish investors prone to knee-jerk reaction. All news eventually becomes incorporated, or 'discounted', in the price of a stock. Overreactions are common when bear or bull news hits the streets. News of iMac rip-offs weren't entirely unexpected, but it did hold back volume and slow AAPL's relentless drive towards $50. The more savvy traders made a good short-term profit on Friday by playing this news like a fiddle.

This week, I expect that after a second look at the new machines by Gateway and NEC, investors will reevaluate this news as bullish for Apple. The fear of iMac-like competition from the PC world has been quelled, at least for this quarter.

The Wintel consortium has once again proven that they are out of step with the prevailing fashion sense among the youthful digerati consumers. Nor can they create a savory digital consumer appliance even if their lives depended on it, as they may well. CPU monitors won't achieve anything like the over the top success of the iMac.

Given time more investors and analysts will realize these vapid, beige and cold steel designs hold little appeal among college students, teenagers, and the 20 something hipsters reveling in the colorful retro fashions of MTV, Wired magazine, et al. As the only culturally savvy digital impresario, the Apple brand name can only be enhanced when compared to the geeky attempts of the PC box-makers at courting consumers. Apple's stock price could eventually soar on this same news, especially when the world sees the playful new portable at MacWorld.

After all, if this severe Gattaca-look is the PC world's idea of how to compete against the lighthearted Austin Power's fun of the iMac, then Apple should prosper disproportionately again this Christmas. Shagadelic, baby!

Look for Apple to find support above $45 and threaten the Holy Grail of $50 again next week. My target for the big above $50 break out was Monday. But, we may have to wait for the Fed to do whatever they're going to do with the interest rate on Friday. Rest assured that AAPL will punch through $50 soon and that its break out could be substantial.

Your comments are welcomed.