Mac Market Built on Sand?

As Apple is finding out with its next-generation iMac, when you're the only sand factory in town, one stuck gear or dropped wrench can hold up the whole process.

Remember Steve Jobs "sand" concept for the creation of personal computers? About the time he lent his star power to the creation of the original Macintosh back in the early 80s, Apples founder famously described his dream factory: an oceanfront site that would haul raw beach sand in one end, cook up its own silicon and deliver fully configured PCs out the other end.

This vision of vertical integration and rugged self-sufficiency is a cornerstone of Apples culture that has informed the companys every move during Jobs two tenures there. (Its telling that the only time Apple ever seriously toyed with opening up its hardware and software specs—porting the Mac OS to Intel processors and allowing a short list of third-party vendors to create a tightly controlled roster of hardware "clones"—was during Jobs exile in the late 80s and early 90s.)

Even if it hasnt garnered the monstrous market share of Windows software and Intel-compatible hardware, the Jobs doctrine has proven remarkably durable with a hard core of adherents, especially in certain professional markets such as publishing. Whats more, since its rebirth in the form of the original iMac, the focus on vertical integration has wooed a small but steady stream of new consumers, including Windows converts and computing neophytes.

Any Mac user whos stuck with the platform through thick and thin can explain the strengths of that approach: By controlling both system software and core hardware, Apple has generally managed to wring a remarkable level of performance from both and create an enviably transparent end-user experience. No wonder many of us who were weaned on the Mac find the lowest-common-denominator approach of Windows ponderous and far from intuitive.

At the same time, this unsinkable do-it-yourself tude means that the pressure is constantly on Apple to deliver the goods to the satisfaction of a complex web of users, developers, distributors and retailers. When youre the only sand factory in town, one stuck gear or dropped wrench can hold up the whole process.

Consider the recent mutterings that have greeted the delayed arrival of the companys next-generation iMac, which Jobs unveiled with typical fanfare at Januarys Macworld Expo/San Francisco.

At the time, Apple averred that the stylish new consumer desktop system would be in users hands within weeks of the announcement. Mac distributors and dealers, however, report that the companys best-laid plans have been derailed--allegedly by an unexpected shortage of the 15-inch LCD displays that form the centerpiece of the new systems. Ingram Micro alone recently reported backlogs nearing 20 weeks on the new iMac.

While unexpected bottlenecks happen to the best forecasters, the effect on a single-vendor ecosystem like the Mac can be far more pronounced than they are in the Wintel jungle.

Jobs Apple made the right move in cutting back the spreading kudzu of product lines that nearly choked the life out of its hardware business in the early 90s; however, Apples commitment to remaining the only Mac game in town means that users who dont want to wait for one model have precious few options--at least within the platform.

If I were to pick a conundrum for a company I like as much as Apple, Id far rather see demand for a new product outstrip supply in this way, rather than the other way around. The volume of pre-orders is a testimonial to the Macs enduring appeal within its small but significant slice of the market, and Im confident that most of those users are going to hang tough until the new gear arrives.

However, I am concerned about what delays of this sort could mean for the neo-iMacs crossover appeal. Among the original models biggest triumphs was its magnetic attraction to consumers who werent already sold on the Mac advantage.

Between the Time magazine cover and the flashy ad campaign (not to mention its own design merits), this years model seemed primed to make the same sort of splash in the general market. But are those users going to be as patient about deferring an equipment purchase in the face of months-long delays?

My friend Stan Flack of MacMinute asked me this rhetorical question: If Joe or Jane Newbie walks into a general PC outlet such as CompUSA in search of a new iMac that isnt in stock, will any salesperson worth his or her polo shirt let that potential sale walk out empty-handed? If there are no iMacs to sell, a Dell or Compaq in the hand is worth two Apple systems on backorder.

And speaking of retail, the current iMac shortage seems to be putting intense new pressure on another potential fault line in Apples vertical model: Anecdotal evidence would indicate that the limited number of new iMacs that are making it into the retail channel are going to Apples newly opened chain of outlets, leaving third-party vendors empty-handed for the foreseeable future.

When Apple got into the retail game last year, Jobs himself took steps to meet with dealers to assuage any worries about their status; according to the same dealers, those assurances seem to have taken a back seat while the company shakes out the current backlog.

One retail acquaintance of mine praised the new iMac as an "all-out hit" and predicted strong spring sales, but he fretted about the dampening effect of the Apple stores preferential treatment. "The natives are getting restless," he said. "Apple dealers have come to the realization that Apple doesnt intend to change their anti-competitive habits and that there is little, if anything that they can do about it.

"Apple know this and knows that they have us in a tight spot. We cant afford to piss off Apple and lose out on product shipments," he said. "As the situation now stands, Apple stores get new product one to three weeks before the independents, and in larger quantities. And thats a very long time in this business."

Undoubtedly Apple recognizes the continued importance of a varied palette of retail outlets if the Mac is going to continue to reach a range of new users. When the chips are down, however, the siren song of vertical integration--from hardware to OS to applications to retail distribution--is still the watchword in Cupertino.

Mac veteran Matthew Rothenberg is online editor for Ziff Davis Medias Baseline and CIO Insight magazines.