October 18, 1999 12:45 PM PDT

Apple is all apologies in G4 price conflict

After getting a black eye from users, Apple moved to repair relations by honoring orders from customers who prepaid for new Power Mac G4 computers before October 13.

Apple today said it would honor all pre-orders--including those placed with authorized resellers--for the G4 computers placed before that date, at the originally quoted prices.

"We clearly dropped the ball in this instance," Steve Jobs, Apple's interim CEO, said in a statement. "We apologize to our customers for upsetting and disappointing them during this past week. Our actions today will hopefully set things right."

Last week, Apple announced during its quarterly earnings report that it was going to have to ship slower computers than customers had ordered at the same price in order to meet demand. Customers balked at the plan, and Apple today apologized for the second time in a week as a result of the gaffe.

Just two days after its original announcement, the company partially reversed the decision--but only for customers ordering directly from Apple, leaving Apple's resellers on the spot to explain to their customers why they were getting a price increase in their systems.

Now, only those customers ordering after last week's announcement will be affected by the price increase on the G4 systems. Customers can order systems with G4 chips running at 350, 400, and 450 MHz, which are priced from $1,599 to $3,499.

"Apple's trying to dig themselves out of something they never should've gotten into in the first place," said financial analyst Lou Mazzuchelli of Gerard Klauer Mattison. "The best thing about the [G4] decision is that they rescinded it relatively quickly." The financial impact of the decision will be negligible, he said.

Product availability is improving by the minute, said Mazzuchelli. The majority of Apple's revenue will be made from iMac sales, and he thinks that there will be plenty of systems to help drive Apple profit for the upcoming quarter.

Customers who ordered the 400-MHz and 450-MHz models will receive their Power Mac G4 systems as ordered at the originally quoted prices, Apple said. Customers who ordered the 500-MHz model, which won't be available until early next year, can instead change order a 450-MHz model at its originally quoted price.

Product shortages
Now all that remains for Apple to do is get its products to customers. The company is working on filling some $700 million worth of backorders, it said last week, a large portion of which represents orders for iBook notebooks. Apple normally has between $100 and $200 million in product backorders in a normal quarter, executives said.

Apple has been focusing on reducing available inventory to dealers before new products come out; generally speaking, having lower inventory levels is good, because if products don't sell fast enough, Apple has to write down the value of inventory on hand, which hurts financial results.

However, the unusually large backlog shows what can happen when a sound inventory-management plan under normal conditions can backfire with a few unforeseen or unplanned events such as earthquakes and component shortages. Apple has been affected by both, and it's showing.

Retail stores that should be full of Apple's PowerBook, revised iMac, new G4, and iBook computers, but a hiccup in product transitions have left some with virtually nothing to sell at all.

"I get tired of telling people I have no new iMacs, G4s, or iBooks to sell," said an unidentified and clearly frustrated Apple salesperson at one CompUSA on the East Coast. The store had two iMac DVs tucked away in storage, one blueberry and another grape, one of which was snapped up before it made it out to the shelves, the salesperson said.

But older 333-MHz iMacs are sitting on shelves, despite discounts to $899--only $100 less than a faster iMac due to hit shelves soon. "They'll have to cut these to $799 to sell them," said the sales representative. "I have customers telling other customers not buy them and wait for [other models]."

Desperate customers stooped to desperate means to get Apple products at this particular CompUSA. One person walked out with a PowerBook G3 model with DVD with three broken keys that had been on display for four months. He paid full price. "Apple will fix it," the salesperson noted.

The CompUSA had no new models on display and expected none anytime soon.

"The only way to get an iBook, DVD iMac, or G4, is to order it," said the Apple sales representative. "They trickle in every day and go out to customers. You can't keep them in the store."

According to PC Data, the iMac was the most popular computer model in retail and catalog sales for June. But by July and August as customers began to anticipate revised iMacs, and as Apple itself bled down inventory, the iMac slipped off PC Data's top five list.

 

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