November 7, 1997 12:15 PM PST
Monday a big day for Apple
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Taking a page from Dell Computer's handbook, Apple is expected to announce Monday that it will begin to sell its computers directly to consumers across the Web and via a toll-free hotline. The company will also roll out three new desktop systems with 233- and 266-MHz PowerPC 750 processors and a new notebook using a 250-MHz version of the same processor.
Apple may also discuss a network computer strategy. Sources close to Oracle, one of the leading promoters of the NC and a company that Apple is rumored to be working with, said recently that they expect the NC to be a major product push for Apple in 1998.
"The Monday meeting now has grown into a full-blown Steve Jobs revival. Anything can happen," said Lou Mazzuchelli, a financial analyst with Gerard Klauer Mattison.
"Apple may try and force the NC issue Monday. I'd rather see them wait until Macworld and demonstrate products. I don't think there will be enough to show off Monday, but they could say, 'Here's a view of the future,'" he added.
With NCs or not, Mazzuchelli is one of the few analysts who thinks Apple's future looks brighter. He issued a "buy" recommendation on the company's stock yesterday, saying he sees a longer term upwards because of changes in sales and distribution of its products and increased advertising activity. In addition, the cost-cutting measures could portend sustainable gains in the share price as well as the prospect of increasing profitability, according to Mazzuchelli.
One move that could boost Apple's prospects is an expected announcement about selling systems direct. The extent of the product mix that the computer maker will sell directly to consumers is not known. Some sources have said that Apple will sell its entire product line directly to consumers, while others suggested the company may initially limit the offerings to a few models.
In any event, "they are definitely going to a direct sales model," said one computer reseller familiar with the plans. Direct sales will likely begin January 15. The sales fulfillment system will be based on the WebObjects technology the company acquired when it purchased Next.
While shifting to a direct sales model is technologically feasible, the shift could easily result in disruptions to Apple's current sales channel.
Apple presently sells the bulk of its equipment through distributors and resellers, which generally mark up the cost of equipment in order to make a profit. In recent years, direct marketers such as Dell have gained market share by cutting out this cost and selling computers directly to consumers for three percent or more below competitors selling through the indirect route.
The danger with Apple's proposed business strategy is that it creates potential conflicts with its reseller base, because Apple might be tempted to undercut its resellers in price. If conflicts occur and resellers begin to defect from the platform before Web sales begin to catch on, cash flow could be disrupted. Analysts don't expect Apple to try to undercut dealers on price but instead offer direct sales as a way of delivering custom-configured systems not available from retailers.
Apple has been contemplating a move to direct sales for quite some time, sources said. Earlier this summer, the company asked the city of Cupertino to lower Apple's sales tax rate, according to various reports. The company noted that a lower city sales tax rate would help drive revenue, published reports added.
Apple also acquired Power Computing's Mac OS license and a list of some 200,000 customers earlier this year and said at the time that the company was looking into creating a direct marketing system similar to what Power had created. Then-acting CEO Fred Anderson said Apple was interested in exploring direct marketing.
Moreover, Apple has made tentative moves toward direct sales for several months. In January, the company launched its initial foray into e-commerce, called Apple Club. The site, accessible to fee-paying members, offers discounts on refurbished hardware and some new systems as well as software upgrades. The site quickly ran into problems, with users reporting complaints about registration delays, trouble entering the site, and privacy concerns.
On the product front, an online reseller site is already posting prices and configurations for the systems to be announced Monday, as reported earlier this week.
The entry-level Power Mac G3 system with a 233-MHz PowerPC 750 processor, 32MB of memory, a 24X CD-ROM drive, and a 4GB hard disk drive is being advertised for $1,977. The midline G3 will come with 266-MHz PowerPC 750, 32MB of memory, a 24X CD-ROM drive, a 4GB hard disk drive, and 100MB Zip drive from Iomega. It's priced at $2,377.
A top-line G3 system with 266-MHz PowerPC 750, a 24X CD-ROM drive, a 6GB hard disk drive, and a 100MB Zip drive is being priced at $2,977. It will ship in a new mini-tower enclosure and offer more expansion slots for peripherals and graphics cards, but graphic designers and video producers will likely still use the existing high-end 8600 and 9600 systems because they offer better expansion options.
Apple's first notebook with the new PowerPC 750 processor, described previously by CNET's NEWS.COM, is now being advertised as the PowerBook G3. It will have a 250-MHz PowerPC 750, 32MB of memory, a 5GB hard disk drive, a 20X CD-ROM and built-in Ethernet networking for $5,649. Although the processor's clock speed is barely higher than that of the current 3400/240 with its 240-MHz 603e processor, the 750's new architecture should allow it to handily outperform the older model.
The new Power Mac G3 systems will feature a 66-MHz system bus, the fastest ever in a Macintosh system. The system bus speed is the rate at which the processor communicates with the rest of the system and is a critical factor in improving the computer's overall performance.
Increasing the system bus speed from the pokey 40- and 50-MHz range used by older Mac systems to 66-MHz is an important step for Apple, since Windows-based PCs have used 66-MHz system buses for several years and are moving toward the 100-MHz mark by next year. Apple is expected to again increase bus speeds next year into the neighborhood of 75 to 83 MHz as even faster PowerPC processors arrive.
Some contend, however, that the system bus speed is becoming less important for the 750 because the processor has another, separate "backside" bus dedicated to moving data between the processor and the cache memory. This "localizes" much of the processing (between the processor and speedy cache memory), improving overall performance. The backside bus runs at 100 MHz in the new Apple systems.