June 4, 2002 6:10 AM PDT

Apple eMac graduates to retail sales

The cathode-ray tube returned to retail Macs on Tuesday, in a surprising turnabout for Apple Computer.

The company has started selling a new eMac--originally a version of the iMac for the education market--to anyone who wants one. The retail version is similar to its education counterpart, but costs a little more and adds a few additional features such as a CD-rewritable drive and 56kbps modem. Like the original iMac introduced four years ago, the new model is built around a CRT monitor.

When the Cupertino, Calif.-based company announced the original eMac, it said the computer was designed specifically for the education market and would not be sold at retail.

"When we announced it was just going to be for the education market, we got beat up by a lot of customers, who said, 'This is a phenomenal system. Why can't I buy it?'" Apple CEO Steve Jobs said Tuesday.

"We can build more than we thought, we are in the business of selling computers to people who want to buy them and we've got a lot of customers who say they want to buy this product," Jobs said. "Why shouldn't we sell it to them? So we decided to change our plan."

The move is jarring because just six months ago, Apple declared that CRT monitors were dead with the launch of the flat-panel iMac. That iMac sports a 15-inch liquid-crystal display (LCD) monitor that swings on a pivot arm from a half-dome base.

"Cost is really the issue here, because of what happened with LCD panels," said IDC analyst Roger Kay.

About the same time that Apple launched the flat-panel iMac, an LCD shortage struck manufacturers, leading to industrywide notebook shortages and creating severe supply problems for Apple. This resulted in a huge backlog of flat-panel iMac orders and eventually forced Apple to raise the price of the new computer.

"This is really a good move given the circumstances, and there really seems to be a lot of interest outside the education market in the eMac," Kay said.

Still, Apple is launching the new CRT-based eMac at the same time that LCD shipments are on the rise, suggesting the worst part of the shortage may soon be over.

"When we introduced the iMac, we even said this is the death of CRTs finally," Jobs acknowledged. "But flat-panel prices have not necessarily cooperated with what we wanted. So the iMac, as you know, we had to ramp the price $100 due to the display pricing. So that does create room for the eMac underneath it...You don't get that luscious flat-panel display, but you do save $300. I think everyone will want the iMac, but the eMac is a pretty good product for $300 less."

The new eMac is the first with a CRT monitor and PowerPC G4 processor. Older CRT-centric iMacs use the G3 processor, which does not take full advantage of the Mac OS's graphics and digital media capabilities.

The new iMac sports a 700MHz PowerPC G4 processor, a 17-inch flat-screen CRT monitor (with 16-inch viewable area), 128MB of SDRAM (expandable to 1GB), a 40GB hard drive, a CD-RW drive, a 32MB Nvidia GeForce2 MX graphics accelerator, two FireWire and three USB 1.1 ports, a 56k modem and 10/100 networking. As with all other Macs, a $99 upgrade would enable 802.11b wireless networking.

A second, custom-built model with a tilt-and-swivel stand and a similar configuration is priced at $1,158.

The retail version of the eMac is $1,099, compared with $999 for the main educational version. A second education version, with CD-RW/DVD combo drive, sells for $1,199. Neither education eMac is available in Apple retail stores or through typical Mac dealers.

Questioning sales
The question looming over the new eMac is the impact on sales, either stealing them away from the flat-panel iMac or better positioning Apple computers against PC alternatives. With the low-end, flat-panel iMac selling for $1,399, Apple hasn't offered a compelling low-cost, entry-level computer since January, say analysts. Apple had kept three older CRT iMacs--ranging from $799 to $999--for price-conscious buyers, but their processing power falls short of 2GHz Pentium 4 PCs selling in the same price range.

"The eMac will give them a little more extension on the low end of the line and help them reach some of the more price-sensitive buyers," Kay said.

But Apple may have to lean on other strengths--design, Mac OS X and digital media applications iPhoto, iMovie and iTunes--to steal sales away from PC makers. Gateway, for example, sells the comparable 500SE PC for $999, packing a 2GHz Pentium 4 processor, 128MB of SDRAM, a 20GB hard drive, a CD-RW drive, an external 17-inch monitor, speakers, two USB 1.1 and four USB 2.0 ports, a 56k modem, 10/100 networking and Windows XP.

But, Kay noted, Apple has priced the new eMac aggressively against PC computers. Compared to the Gateway 500SE, the eMac packs twice the hard-drive capacity, better graphics capability and a potentially better monitor.

"I am sure the new eMac will help some against PCs, but we're still talking tenths-of-a-point share gains here," Kay concluded. "I wouldn't expect to see much change. I also don't see the eMac"--selling at $300 less than the low-end iMac--"cannibalizing many sales from the flat-panel iMac."

Sales of the flat-panel iMac lifted Apple's market share about 5 percent during the first quarter, according to IDC.

 

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