July 7, 1998 5:50 AM PDT

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NEW YORK--The Macworld Expo trade show opens tomorrow in New York for the first time, but some wags are suggesting that it be renamed iMacworld for all the emphasis on the company's upcoming line of flashy consumer computers.

Expected to ship in August, the iMac combines the monitor and computer into a curvy, wedge-like housing of two-toned, translucent colors. Priced at $1,299, it will be prominently showcased at Macworld, as Apple does its best to stir up a frenzy of interest in its first new consumer system in over a year.

Apple is banking on sales of the iMac Apple's new iMac to boost its market share beyond the four percent it garnered in the first quarter of 1998--a slight improvement over the previous quarter--while also helping profits.

Some retailers seem confident that the sleek computer will aid both Apple and themselves. "We'll sell lots of them. This is the sexiest computer I've ever seen," said Jim Halpin, president and CEO of CompUSA, the largest U.S. PC retailer, in a previous CNET NEWS.COM interview. More recently, Halpin said in a prepared statement that the company was counting on sales of the iMac to improve its own fortunes after announcing the company expected to post a loss for the quarter most recently ended.

Analysts are more restrained in their reaction. "Can [the iMac] really make a hit in the consumer market? I'm skeptical that one product is sufficient to do that, other than help turn sales to the installed base--which is good," said Eric Lewis, PC market analyst with International Data Corporation.

"That's real revenue and keeps those users around for a few more years. But to really attract new users, you have to do something new," he added, implying that the new iMac may not be novel enough to attract a large number of new users.

That "something new" has been put on hold, according to reports: Apple has been working on a device which would combine Internet access functions with DVD playback and connections for digital satellite and other digital video inputs, as first reported by CNET NEWS.COM, but the device is unlikely to make it to market this year.

In the months following positive reaction to the iMac, Apple's set-top effort has apparently taken a back seat to the iMac, according to sources who had previously been briefed by the computer maker on the set-top project. No information on the newfangled product has been forthcoming from Apple since May, and another industry source reports that Apple currently has no plans to introduce the device.

However, technology from the set-top box has already found another home: Two separate industry sources indicate that the device's motherboard, which holds electronic guts of a computer, is being used in the iMac.

An Apple representative declined to comment.

Apple, as have other PC companies, realizes that TV is still the centerpiece of a typical home's entertainment center and is trying to figure out ways to offer computer technologies in the living room. The combination of digital television and DVD with Internet access could prove popular, thinks Sean Kaldor, another IDC analyst.

So why Apple would forgo an opportunity to take the lead in a new market and push the iMac instead?

Because to move into these markets and be profitable, computer companies would have to radically adjust their business models to support the higher volume sales and lower unit costs of the consumer electronics market--something which Apple has decided to forgo. "Information appliances are coming along, but PC vendors are being cautious. They are looking for incremental sales, but they don't want to steal PC sales," Kaldor observed.

Richard Doherty, president of the Envisioneering Group, offered that "Some people might look at the iMac decision and say, 'That's smart' [because they doubled] revenue rather than selling twice the number of devices at lower price point."

"The iMac builds in profitable peripherals [such as a monitor] that a third party [such as Sony] would've walked away with," he noted.

In the meanwhile, IDC's Lewis thinks the iMac "will get some loyal Mac customers who haven't upgraded their consumer systems to do so. It has a lot of power for a reasonable prices. It may get some first-time buyers to take a look because it will stand out."

 

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