February 22, 2001 3:30 PM PST

Analysts not tickled pink over Apple's new colors

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CUPERTINO, Calif.--While many people have been calling for Apple Computer to make bold changes to its iMac line, the computer maker's wild new colors may not be what most consumers and industry analysts had in mind.

Analysts Thursday said they are worried that Apple's decision to bank on patterns such as flower power, a psychedelic flower pattern, and blue dalmatian, a blue-and-white polka-dot pattern, could limit the appeal of Apple's best-selling machine.

A $100 price increase for the low-end iMac could also potentially damage the product's popularity, analysts added.

"We are concerned that these bold new patterns will appeal to a limited audience at a time when Apple needs to broaden its appeal," Salomon Smith Barney analyst Richard Gardner said in a research note Thursday.

CEO Steve Jobs introduced the new models late Wednesday during a keynote address at the Macworld Expo in Tokyo.

Apple maintains the new colors are needed to keep iMac on the cutting edge. The decision means that previous hues--ruby, sage and snow--won't make it to their first birthday, but Apple marketing executive Greg Joswiak said the frequent changes are needed if Apple is "going to be where fashion and technology meet."

At the same time, Apple did fill two big consumer holes with the new iMac line--adding faster processors and CD-rewritable drives. Apple also made additional features, such as a FireWire port and support for an external monitor, standard throughout the iMac line.

Gerard Klauer Mattison analyst David Bailey, however, questioned Apple's decision to raise the cost of its low-end iMac to $899 from $799.

The wrong signals?
"We were a little surprised they raised the entry price on the iMac given the current demand," Bailey said. "We understand the company is trying to boost profitability, but it may send the wrong signals."

Bailey, too, was dubious about the new colors.

"They may be limiting their market with the new color schemes," Bailey said. "It doesn't appear that too many adults will be selecting the new color schemes."

For flower power and blue dalmatian, Apple spent 18 months developing the technology to create a pattern within the iMac's clear plastic case. The company eventually decided to use a sheet of screen-printed Mylar between the layers of plastic to create a sense of depth.

"Think of it as a sandwich," said Linda McNulty, director of worldwide product marketing for Apple's desktop lines. McNulty said the bold colors represent the energy of the music revolution Apple is embracing.

"We wanted to further convey what music would look like...as a color," McNulty said.

Bailey said Apple may soon need to do something more drastic with the iMac line, such as incorporate G4 processor technology or add a larger screen. However, such a change would probably be more urgent closer to the holiday selling season, he said.

While the iMac remains the primary consumer line for Apple, the company is also clearly trying to move the stylish but slow-selling Power Mac G4 Cube more into the mainstream market, further cutting the price of the low-end model by $200 to $1,299.

Apple also said Thursday that it will start bundling games and other home-oriented software with the Cube, as the company has previously done with the iMac and the iBook laptop line.

But at $1,299--which does not include the price of a monitor--the price gap between Apple's computers and PCs in the Windows-based world appears to be growing, Gardner said.

"While Apple has historically commanded a premium over (Windows-based computers), recent price checks indicate that the company's Power Mac desktop offerings are now up to 35 percent more expensive than comparably equipped systems from Dell," Gardner said in his research note.

Apple is counting on the new models to help the company rebound from slow sales during the holidays that led to a $247 million loss in the most recent quarter. Apple has said it is expecting to deliver a slight profit in the current quarter.

 

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