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Poor Old Resellers: Where, oh where, have all the iMacs gone?

By Nobody Special (nobody@macedition.com), March 26, 2002

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Well, another Macworld has come and gone and the $64,000 question this week is, “What in blazes is happening down at the assembly plant?”

Some might feel cheered by the fact Apple has managed to roll 125,000 new iMacs off the assembly lines over the last two months, but to my eyes this number pales past the point of insignificance given the historical output of the organization.

Consider that in the fourth quarter of 1999 this same company rattled off a little more than 300,000 iMacs and that year was hardly the high-water mark for production – or popularity of the iMac line – since Steve Jobs retook Apple’s helm.

If averaged out from the day the new iMacs were announced, we’re talking about a daily run that numbers about 1,750 units each day for the planet Earth – a long ways shy of the 5,000 systems per day Jobs said Apple is reaching now, and a damn sight short of what booking numbers were like from retailers and distributors once the product launched. Small wonder why the hottest ticket in the known computing universe is also the rarest find on reseller floors on this planet.

One could overlook this if iMac demand were a new and unforeseen phenomenon. But this is not the first time Apple has refused to ramp up production to the max and go for the killer punch.

Bondi blues

In 1997, when the first Bondi Blue iMacs rolled off the line, the company was overwhelmed by demand for the product. To look at Apple in the light of those days, one could say, “Fair enough.” Apple was just beginning to emerge from its darkest of days and the appeal of a legacy-free computer was a hotly debated point amongst armchair CEOs. The market embraced the original iMac with more warmth than anybody could have imagined. The production underruns that ensued were understandable given that Apple came back from the grave screaming and kicking with that one product.

But that was just the beginning of the company’s inability to strike while the iron was hot. Apple blew a production piston again in late 1998 with the launch of the original graphite iMac SE, a machine that turned out to be the most wanted item on every Santa’s shopping list. Then, it followed up that production disaster in 1999 with a massive production underrun of the initial 300MHz iBook and pretty much every flavor of iMac for the quarter. That disaster pretty much botched the whole back-to-school season that year.

It might be easy to dismiss these events as insignificant as they represent lost opportunity revenues rather than real cold cash going out the window. Apple had the Cube to illustrate what happens on the other end of the scale.

But every issue the Cube had with the consumer market was addressed with the new iMac. Every piece of “gotta have it” technology was poured into the new iMac. Every price point that had to be reached was hit by the new iMac. That somebody out there only booked enough components for about 100,000 of these things has got to be the underestimation of the century, given the killer product Apple had in its hip pocket. We’ll probably never know whether the quantity of components were all the suppliers were willing to commit to, or if this was as far as anyone at Apple was willing to gamble on the new iMac being as successful as it has been in the marketplace. If it’s the latter, and Mr. Jobs still has his legendary temper, some people in Cupertino ought to be wearing their butts up around their shoulder blades.

Those opportunity revenues aren’t something accountants make up to justify their jobs. Those numbers represent real people who get really pissed off with a company that just keeps screwing up. Eventually, these people give up and go over to the other side of the tracks, where they know they can get something that fits their bill of needs.

Because it’s worth it?

In Tokyo’s second rude shock, Apple decided to pop a US$100 price increase on the new iMac because of a ramp-up in the pricing of RAM and TFT screens.

Fair enough, but I have to wonder why Apple didn’t hear the stamping of feet last November when every RAM vendor was telling its clients, “Buy now, ’cause prices are going up.” Maybe it was a case of dismissing the talk as just so much hype, but you have to figure it could have squeezed a heck of a deal on half a million sticks of 256MB RAM, no matter the current market conditions.

The same goes for TFT screens. Apple bought a small chunk of Samsung a couple of years ago to assure itself a steady supply of the LCD screens. If the company went to such unusual lengths to assure itself of a supply then, what changed in the marketplace that it felt it could dump the Samsung shares and ride the waves of market demand? It wasn’t like there was a big rush back to dual-scan displays amongst other laptop manufacturers. If anything, everybody and his dog were rushing to embrace TFT as the new de facto standard for LCD displays.

So, Apple now admits it was caught out and it’s now going to cost its customers another US$100 because of the lack of long-term vision by its nuts-and-bolts people. Now as straight forward as this might seem, it turns out that it’s not. In Canada, an extra US$35 for the CD-RW variant of the iMac pads the US$100 increase. In Australia, the company’s Web store keeps the door open on the older lower pricing if people place their orders before the end of the month. Dealers down under however, don’t know what’s going on. Talk about your mixed messages. The gold rush and the golden fleecing is on. It’s a situation only Chairman Mao could be happy with (“There is much confusion under heaven ...”).

The only silver lining out of this is that Apple isn’t pulling a repeat of the fiasco that surrounded the first G4 systems when they came to market. This time, if you did a deal at the lower prices, you’ll get your system at the lower price. If nothing else, this will ensure that those who committed to buying an iMac will actually buy the thing when it finally arrives. If they don’t, the dealer involved will likely resell the system at the new higher price and pocket the extra margin as some small compensation for carrying larger inventories of the iMac than it would have otherwise liked.

Whether the price increase slows demand for the units still remains to be seen. We are, after all, talking about a price increase that represents five percent or less of the system’s total purchase price. In a world where we’ve seen gasoline and utility pricing jump 100 percent inside of a month, this is small potatoes.

Oh yeah, and Apple did give us a 10GB iPod with PDA-like features – too bad you need an iMac to make it effective. Without sufficient numbers of this piece of hardware the announcement of a new and improved iPod seems somewhat moot.

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