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Apple’s Top Ten Things To Do List for the Year 2000
Apple has been very busy since Steve Jobs came home in 1996. Much of the heavy lifting is done. The fat has been cut to the bone. Employee, shareholder and end-user morale is restored. The Macintosh product line has been reinvented with the future in mind. Sometimes it seems like there are no insurmountable hurdles left for Apple–except to fill those iBook back orders by Christmas. Nevertheless, 2000 will be a watershed year for Apple full of novel challenges. Here’s a list of the top ten things Apple is planning for the Mac platform. Note: a few are extrapolations of Apple’s intentions and may not come to pass. 1. Internet Strategy. Apple desperately needs to announce a serious, get-with-the-program, Internet strategy. Apple is behind both the Gateway and Dell curve on this one. Less than 5% of Mac sales come through the online Apple Store. Part of the problem lies in the Apple Store’s inability, for a number of complex reasons, to sell products to customers outside the US Even Mac users in Canada cannot purchase online from the Apple Store! That’s a pretty lame implementation of the World Wide Web for a company as hip and high tech as Apple. The Apple Store needs to be expanded further so that purchases can be made from any locale where it’s legal to sell computers. Fred Anderson, Apple’s chief financial officer, said twice this fall that an announcement is forthcoming early next year on Apple’s Internet strategy. He has also said that he intends to increase the Apple Store’s sales to 50% of Apple’s overall sales. Selling Macs online is hardly all that the web is good for. Like most PC vendors, Apple needs to bundle a sweet ISP deal with every new iMac and iBook sold. Thirty-something percent of iMac purchasers are digital newbies. Almost all of them could be shepherd to an Apple ISP. Eighty-nine percent of all iMac users log on. That’s a higher percentage of Internet usage than any other PC brand can claim. If only 50 percent of those iMac surfers decided to go with Apple’s ISP, the numbers could add up to more than a million new subscribers in just the first year. That’s not even counting the millions of Mac users who, while staying with their local ISP, would immediately switch over their portal alliance adding a vast eyeball count that would make the venture almost immediately profitable. Unlike the other PC vendors who have little grassroots support on the Web, Apple could take their Internet strategy well beyond the orthodox. The corporate leadership needs to wake up to the overwhelming demand by Mac users for their own Mac centric portal to the web. There’s an army of rag tag, Mac loyalist web sites out there, reaping millions of visits per day, spawning terabytes of positive vibes around the Macintosh brand name. Imagine if our Apple leadership could Think Different enough to find a way to tap into and focus this spontaneous "Mac Web" fountain of energy. The potential is mind-boggling! 2. Mac OS X. It’s finally going to happen sometime during the first half of next year. OS X is essentially the Mac OS for the next decade. It won’t be backwards compatible for those of you who still have yet to upgrade to a G3 or G4, but that’s the price one pays for progress. Don’t worry, Apple plans to keep supporting the Mac OS with upgrades for several more years yet. In many ways, OS X is the most important event on the Mac calendar for the year 2000. It certainly will be the most challenging. Unlike the recent mild OS 9 upgrade, OS X is a paradigm shift, a major bifurcation upward from the steady evolution of the Mac OS from its primitive beginnings as OS 6 in the late 1980’s. OS X is going to rock your world, but it’s going to provide you with a bit of a learning curve too. Among the dozens of new possibilities that OS X will open for Mac users is the ability to support Distributed Objects, or the division of cycle-intensive tasks over any number of Macs running OS X. You and your friends will be able to combine resources via fast Internet connections creating your own multi-processor super-computer. Cool. More importantly OS X will lead the Mac charge back into the enterprise market space taking on the rival NT and Linux systems in their home territory. Quintessential OS X is as much a reason for investors to be long-term bullish on AAPL as the iBook and the iMac combined! 3. Apple Super Stores. Yes, it’s only a rumor but one that makes a ton of financial sense. And now there is even more reason to suspect something big is up in marketing. Apple recently hired Allen Moyer who helped design Sony’s Metreon retail-entertainment complex in San Francisco. His experience combined with Gap CEO Millard Drexler’s, who was appointed the Apple board of directors earlier this year, could make a killer team for the implementation of a high tech, high fashion, user-friendly Apple retail experience coming to a major city near you. 4. Flat screen iMacs. This just seems the obvious course of convergence. Apple has to come out with a TFT LCD desktop computer in the next 18 months. Why? Let us count the ways. One, there is a strong demand for a flat panel "iMac", or at least my own unscientific survey indicates strong interest. Two, evolutionary convergence. Complex systems such as the trajectory of computer design flow like water along the path of least resistance. Flat panel iMacs are just such a design path. Three, LCD display production is ramping up to meet the new demand crush this year. If history is any guide, in 18 months the factory build out will lead to over-production and economies of scale unheard of today. Flat panel monitors will become widely available and relatively inexpensive. The economics will be ripe for Apple to introduce a flat panel iMac. Four, the development costs and time required for such a product are minimal compared to the next generation of G5 super Macs of 2002, including the future Mac "wearable" concepts so secret that no one has even heard a murmur yet. It’s a no-brainer. 5. A Mac Handheld? Apple was a few years ahead of its time in the information appliance market space when it introduced the Newton back in 1993. In fact, the Newton practically invented the concept of the handheld. Now, rumors are flying that Apple is working on an "information device". And why not? Every tech pundit has latched on to the need for the PC vendors to move beyond PCs and into more imaginative and miniaturized ways to leverage data. Earlier this year, Steve Jobs tried to buy out 3Com’s Palm Computing handheld division and later he tried to purchase Handspring, a start-up company dedicated to the development of handheld information devices. So we know Apple is hot, if silently, on the info appliance trail. Even Wall Street believes something is up. Recently, ABN AMRO analyst Jonathan Ross initiated coverage of Apple with an ‘outperform’ rating with this observation, “We believe no PC maker is better positioned with consumers to take advantage of large opportunities in the emerging device and home networking markets." 6. Faster and faster G4s The latest iteration of the PowerPC 7400, code named V’Ger, promises to continue the G4 Pentium toasting tradition well into the next century. According to Macosrumors the newest G4, now in testing, which runs at 780 MHz "includes an on-chip 256K L2 cache at full processor speed, and up to 2MB of half-speed backside L3 cache. It will also utilize a .18 micron copper process, reduced power consumption, "deeper pipelines" to enable higher clock rates, two new integer processing units (for a total of four, effectively doubling the G4’s performance per MHz on many common tasks), improved use of its four Altivec units, and a special 256-bit data path to the on-board L2 cache (compared to 64 bits on current G4s)." The recent nightmare scenarios of the Motorola and IBM Power PC alliance falling behind the Intel/AMD coprocessor speed curve seems to be largely unfounded. By 2001, you can expect screaming 1GHz PowerPCs to be available for delivery. 7. Win2000. Although certainly not an Apple product per se, it is the OS that might just do what an army of DOJ lawyers can’t do–break Microsoft’s monopoly. The public, as they become more computer savvy, are increasingly losing patience with buggy software. Win2000, already months behind schedule, now has a release date set for February. That’s great for a timely comparison with Mac OS X as a topic of discussion in the media and IT departments around the world. A side by side taste and price comparison with Win2000 is likely to prove detrimental for the Wintel cartel and may boost Mac sales on scale no Apple marketing campaign could ever achieve. 8. Increased productivity in Sales and Support. This is Apple’s soft bureaucratic underbelly. If there is any waste going on at Apple it is the unorganized and confused manner in which Apple conducts sales and support. Often the left hand knows not what the right one is doing. Simple tasks such as customer fulfillment often become Byzantine epics, which alienate end-users and frustrate hard working employees alike. Recently, the company has been working hard to consolidate these departments–even as they expand to meet increased demand–into a mean lean moneymaking machine. Moreover, Apple’s new Internet Strategy and retail initiative will surely mean further productivity improvements in a system that has yet to reap the benefits of the network age. The bottom line is, of course, a better bottom line for fiscal 2000. 9. Dividends? High tech companies usually don’t issue dividends and few investors expect them to, it’s seen as old fashion. Most high tech companies are high growth and must plow those profits back into heavy research and development programs and big marketing campaigns, thus precluding shareholder dividends. Apple is no exception to this rule. However, Apple has, in the distant past, paid dividends. If Apple’s profits from investments in companies like Akamai and Arm Holdings continue to pay off strongly, dividends are a possibility. Dividends may even become fashionable among technology leaders in an effort to maintain high valuations and lower beta coefficients. After all, dividends reward long-term investors as opposed to the flaky, get-rich-quick, microtrend traders (like myself), who tend to "flip" stocks to the tune of the latest fashion. But don’t hold your breath. 10. Stock Split. Points 1 through 9 all suggest that Apple is going to have a very good earnings per share in 2000. Last year at this time Apple stock was selling for about $35 a share. Today AAPL trades for 2.7 times that much. In November of 2000, it’s a safely conservative bet that Apple will double yet again to $180 per share, if most of the above (or more) comes to pass. A stock split is definitely in the cards, probably in the $150 range. I’m guessing the company won’t split the equity till the price is well beyond ever having to trade in the ignominious $20 to $30 range again. Watch out future, here we come. Your comments are welcomed. |