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Apple's Pain Is Your Gain The ancient Chinese curse goes: "May you live in interesting times." Guess what folks, these are interesting times. Many are looking at the current turmoil with Apple's finances with a "the glass is almost empty" kind of feel, but I have to say I see an awful lot of opportunity to fill that glass with some delicious spring water. I am also done butchering clichés. The Set-Up Apple has allowed 11 weeks of inventory to build up in the channel, some 6 weeks more than their normal target of 5 weeks. The company has also vowed to reduce that inventory by hook or by crook. The end result for all of us will likely be the cheapest prices we have ever seen for Apple's products, and there are several issues that are working together to make it so. The Bad Apple is about to report their first loss in 3 years. More importantly, this is the first loss since Steve Jobs retook the helm of the company. Quick Poll: Who thinks Mr. Jobs is pleased with this? I didn't think so. Mr. Jobs & Co. have decided that the company would swallow all of its medicine this quarter. With Apple's stock trading at only a couple-of-three of dollars above the value of their physical assets, there is little chance that AAPL can trade lower. So if the company can fix this problem NOW, the company's stock should rebound faster and higher than it would if they stretched it out longer. Since Mr. Jobs' main income is tied up in a King's Ransom in stock options, options that are worth less than nothing today, getting the stock price up is likely important to the man. It is also his fiduciary duty to maximize shareholder value, and Mr. Jobs has been diligent in pursuing this responsibility since his return. The Really Ugly More importantly, Apple is being plagued by ongoing problems with the AIM consortium. That problem being the fact that they are still selling virtually the exact same machine today that was introduced in September of 1999. We aren't even counting the fact that it was pulled from the market before it was even shipped, because that's another story. That's when the 500 MHz PowerMac G4 was introduced, and that is effectively what they have today. Please do not lecture me about the value of dual processor machines. The vast majority of Mac users will not see the benefit of multi-processing for years to come. In a year and two months, Motorola has moved from 500 MHz to 500 MHz while the Intel/AMD camp has gone from some 650 MHz to 1.5 GHz. It is my opinion that this is hurting Apple even more than the worldwide slowdown in PC sales. As I suggested in a Spin earlier this week, Apple's upgrade sales are really suffering because users have little reason to upgrade. Our own Kyle D'Addario has a two-year old 400 MHz B&W G3 that is not that much slower than my seven month old 500 MHz PowerMac G4. That machine is effectively as fast as today's fastest dual processor G4 unless I am deep into a 150 MB Photoshop file. I have never messed with a 150 MB Photoshop file. The bottom line on this is there are lots of satisfied and content Mac users out there who aren't suffering from one iota of processor envy. The computer industry has invested a good deal of time and money in cultivating processor envy, and for good reason. That reason is what you see in Cupertino today: no one buying new computers to replace last year's model. The Uglier Truth MACWORLD San Francisco needs to see some new machines coming from Apple. The entire product line needs to be updated, with the possible exception of the iMac line which could wait for MACWORLD Tokyo. This is important for Apple. Rumor has it that the company is prepared to release 500, 550, and 600 MHz PowerMac G4s, and it would be easy to assume that similar PowerBooks are ready to go as well. After all, IBM has 700 MHz G3 processors supposedly ready to go. Apple not only loses out on some new sales to people basing their decisions on MHz ratings, their own customers are sitting pretty on with warm fuzzies because their machines are not "obsolete." With this in mind, it is imperative that Apple make a big deal about releasing faster machines in San Francisco. They need the free press associated with a major trade show. They need it for the perceived value issues with consumers. They also need to show Wall Street that they can move out of 1999 into early 2000. I know, that was a cheap shot, but it's the truth. Here's the rub: They can't really release new models at MACWORLD if their retail partners are sitting on US$MoreMoneyThanYouAndIWillEverMake of inventory (Note to Bill Gates and/or Larry Ellison: I know this doesn't include you). They have to help their channel customers move that product and get it off the floor. One of the best ways to do this is some heavy price cutting or other special pricing offers. Most of the time when people ask me for Mac buying advice one month before MACWORLD, I tell them "Wait, if you can." This time around, however, I have to tell everyone out there to keep their eyes peeled. I think between now and Xmas (has a nice ring to it, doesn't it?) we are going to see some absolutely great prices on Apple's entire product line. Once Christmas is over, we are going to see another round of cheapness as Apple and retailers use "End Of Year Clearance" sales to chase the rest of their inventory out the door. Apple laid out the first two rounds this week with some incredible prices on refurb units (US$2199 for a 500 MHz PowerBook? Come on! That rocks!), and some US$150 coupons they sent to many Apple Store customers. So will we see new PowerMacs at MACWORLD? I certainly think so. Should you wait until then to buy a new Mac? Not if the price is right. In this case, Apple's pain is your gain. Enjoy it while you can. Special thanks to Kyle D'Addario and Wes George for their help with this piece. Your comments are welcomed. |