Analysis

Posted on 24 Jan 2003 at 15:02

 

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Steve Jobs' two-hour keynote address to the Macworld faithful was one of the most important he has had to make since he returned the company five years ago. The computer market is in a wretched state and it is not certain that the company will able to return to profitability during its Christmas quarter. Apple is believed to have endured a tough last three months and is lumbered with piles of unsold iMacs and Power Macs.

Tucked away in a December filing by Apple to the US Securities and Exchange Commission was a stark acknowledgement of just how hard the megahertz gap is hurting Mac sales.

'[Apple] believes that many of its current and potential customers believe that the relatively slower megahertz rating or clock speed of the microprocessors it utilizes in its Macintosh systems compares unfavourably to those utilized by Windows-based systems and translates to slower overall system performance.

'There have been instances in recent years where the inability of the company's suppliers to provide advanced G4 and G3 microprocessors with higher clock speeds in sufficient quantity has had significant adverse effects on the company's results of operations,' admitted Apple.

Until the arrival of IBM's wonder chip, the PowerPC 970, sales of Apple's underpowered desktop product line will continue to languish, no matter how many slick Switchers ads the company runs. It's all a long way from the Pentium-bashing ads of a few years ago.

Indeed, on the eve of Jobs' address, a report by Merrill Lynch analyst Michael Hillmeyer painted a gloomy picture that suggested Apple was losing its way. 'Although Apple makes great products, in our view the new product pipeline looks skimpy and we expect continued market share losses,' he wrote.

So Jobs polished his famed reality distortion field and hyped an admittedly large list of product announcements with a firm focus on the positive. He talked up Apple's Switchers campaign by revealing that since it began in the US last summer, Apple's Switch Web site has received 7.8 million unique visits, of which 68 per cent were Windows users. He made no mention of resultant sales, however.

Not surprisingly, then, the main focus of Apple is on software. Jobs said there were now five million active Mac OS X users, a number he predicted would rise to 10 million by the end of this year. Jobs claimed 5000 OS X applications were available and showed off updates to Apple's own impressive range of iApps, as well as a new browser, a budget version of Final Cut Pro and Keynote, a PowerPoint killer.

However, all this focus on software means Apple is in danger of alienating its key third-party developers, including Microsoft, Adobe and Quark. The company is playing a dangerous game competing with its own partners at a time when the Mac platform needs all the support it can get.

Author: Paul Nesbitt