New Apple Notebooks Enter Rough Market

Will the enhancements to Apple's new portables' be enough to keep the company trucking through a tight holiday season?

With a low-key refresh of its pro Titanium PowerBook G4 and consumer iBook notebook lines, Apple Computer Inc. has tuned the engine that drove a large chunk of Mac sales during a down year for the PC industry. But will the enhancements to the portables speeds and features be enough to keep them trucking through a tight holiday season?

According to some industry observers, the company will have its work cut out for it. Under CEO Steve Jobs, Apple has moved away from its traditional "event-oriented" product announcement schedule, which focused on January and July Macworld Expo gatherings in San Francisco and New York, respectively. A mid-October announcement gives Apple a jump on holiday sales, but it pits the new notebooks appeal against a PC market that has been hit hard by recent geopolitical events and a sharp drop in consumer confidence.

In addition, Apple on Wednesday invited journalists to a second October announcement: an undisclosed "digital device" that the company will announce on Oct. 23. While the company declined to specify the nature of the new product -- other than to say that it wont be a Mac -- sources said they expect it to be a recorder-player for digital music.

Magnifying the importance of this announcement is the critical place notebook products have taken in Apples lineup, especially when it comes to the companys bottom line.

When Apple announced its third-quarter results in July, less than three months after the introduction of the new-form iBook, the company stated that notebooks accounted for a record 36 percent of total hardware sales. Unit sales of the iBook alone (both old and new models) reached 190,000 units, representing a 245 percent gain over the previous quarter; in comparison, though more iMacs were sold (306,000), the gain over the previous quarter was only two percent in units.

This is not to say that the iBook has been Apples only strong performer, even in the weak market of 2001. Earlier this year, as the personal computer industry stalled out, the recently intro-duced titanium PowerBook spurred a 23 percent growth in sales over the previous quarter and comprised more than half of Apples notebook sales.

Reaction of those contacted by eWeek has been cautiously optimistic.

As the analyst sees it

David Bailey, a vice president and research analyst at the New York-based firm of Gerard Klauer Mattison, noted that the iBook and PowerBook family were both ripe for a refresh, since neither had been upgraded since the first half of the year.

Furthermore, "Its important to refresh products before the holi-day season," he said, even if most expectations are for "dismal" retail numbers this year.

This weeks news came too late to make the cut for education sales for the 2001-2002 school year, which institutions normally place in June. Nevertheless, Bailey said, the continued health of the iBook is "critical in the long term for Apples sales in education."

"The majority [of iBooks] are going to educators of pilot projects" in schools within the United States, Bailey said. If these new models impress those early education adopters, they could spark more widespread demand for iBooks in subsequent quarters. "Theyre not currently in widespread rollout to classrooms, but we expect that in the next few years," he said.

Bailey described the kindergarten to eighth grade stretch as "still a stronghold" for Apple, though the Windows platform has made inroads at the high school level.

As to whether the recent release of Mac OS X 10.1 -- which Ap-ples Jobs called "the release everyones going to be using" -- has driven hardware sales, Bailey said that its still too early to tell. The new OS ships standard alongside Mac OS 9.2.1 on all the new laptop configurations, with the latter as the default system.

For Apple to see a big hardware sales boost from the OS, Bailey said, Mac OS X would have to be the default operating system, and the most desirable third-party software would have to be available in Mac OS X versions. (Microsoft has said that its next version of the companys productivity suite, Office v. X, will be available in November and will require Mac OS X 10.1.)

In any case, Bailey said, Apple and other manufacturers face an unusually steep uphill battle this year. "Given the state of the economy and consumer confidence worldwide," Bailey said, "its a difficult time" to drive new sales.

Bailey characterized the PowerBook and iBook changes as "rela-tively incremental" and suggested that "faster and cheaper arent enough right now" given the tough market. Something "radically different," he suggested, would have a better chance of being a breakout – or even notable -- seller. Still, he said, Apples notebooks promise to remain relatively solid performers.

View from the retail front

Fred Evans, a reseller at First Tech in Minneapolis, said that the PowerBook and iBook revisions were well-timed to wring the maximum marketing momentum out of the pending holiday season.

"Its actually a good time to announce for the holidays -- as long as its not too long before we see some product," he said. He added that an October unveiling provides time for the new models to be featured in catalogs and other promotional materials, which have traditionally provided a dramatic boost to Mac sales.

Evans said that the second busiest time for his business, after the holiday season, is January; he attributed this not only to the bump from that months Macworld Expo and the hype it provides but also because "personal and business budgets are fresh at that time -- people can buy," he said.

However, Evans doesnt mind the lack of event surrounding some product announcements. "My pet peeve," he said, "is that Apple doesnt seem to include dealers in the hype surrounding Expos" and other events. He said that part of the problem is Apples legendary secrecy about forthcoming product introductions, a policy that prevents retailers from getting their hands on product or even product descriptions before the big events. "By the time we receive product," Evans said, "its kind of old news. Even after only 10 days, its kind of old news."

"Releasing product in January and February to coincide with Mac-worlds is an odd Apple thing that doesnt make sense [for retail-ers] in the real world," he added.

However, Evans said that the iBooks original introduction, which took place in a small hall on Apples campus, soon after which Evans could display and sell units, "was one of the most successful" hes seen.

So far, there has been no word as to whether Apple will hold events similar to the "Demo Days" promotions the company sponsored in late 1999 around the 5 October 1999 launch of a revamped iMac line. That initiative did seem to spur heightened sales in participating stores, contemporary reports indicated.

David Lerner, co-owner of Tekserve, a New York Apple dealer, agreed that "this is the normal time to introduce such models." He also noted that the length of time between the iBooks refresh and their initial release was an unusually short five months. "I think six to nine months is more common," he said.

Lerner also said that Tekserve saw an overall slowdown in sales last week that affected all product lines. "Im guessing its a delayed reaction to the [Sept. 11] terror and its effects on business and jobs," he said.

Additional reporting by Nick dePlume, editor and publisher of Mac-industry Web site Think Secret