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JULY 8, 2004
By Alex Salkever A Six-Step Plan for Apple While iPods sizzle, Macs and laptops are sluggish. It doesn't have to be that way. Here's how to get that computer market share surging To: Steven P. Jobs CEO, Apple From: Alex Re: Expanding the Mac market Dear Steve, No doubt you were disheartened by Apple's (AAPL ) delay from July to September in introducing the new iMac -- especially given the decision to stop production of the second-generation model. But honestly, did you have any choice? Let's face it. They haven't been selling like hot cakes -- even with the iMac's nifty swiveling flat-panel display and stylishly compact footprint. Sales peaked at 448,000 units a quarter after its release in January, 2002. It has been downhill ever since, with sales in Apple's second fiscal quarter ending Mar. 27, 2004, totaling just 252,000 units. Your iBook laptops are struggling in the marketplace, too. Sales totaled just 223,000 units in the most recent quarterly report. Sure, the iBook posted an impressive 47.7% increase in units shipped in Apple's second fiscal quarter, vs. the same quarter of 2003. But that comparison rings hollow because that period in 2003 was the nadir for iBook sales over the past 10 quarters. The overall picture looks like doldrums. Apple's share of the U.S. PC industry has fallen from 4.2% in mid-2002 to 2.8% in the first quarter, says IDC. Now I've heard your execs say sizzling iPod sales will eventually have a halo effect, snaring new users for Macs as well (nice iPod ads, by the way, catchy and hip). But let's be real: iPods alone won't turn around sales in desktops and laptops. It's time for a bolder plan. Not that you asked, but here are my suggestions. Let's call them "Six Steps to a Bigger Mac Market." Here goes. 1) Price trumps style in the computer market I know this may be hard to admit for a guy as innovative and design-conscious as you. But Apple charges too much for its computers. The PC market's benchmark price level is sinking quickly below the $1,000 mark -- turf where Apple has been loath to tread. Even laptops are moving down into a similar range. Yet, Apple's list price for iMacs started at $1,300 before production was halted. And the iBook remains listed at $1,100 on Apple's Web site. First Albany Capital analyst Joel Wagonfeld says taking into consideration discounts by resellers, the average price of an iMac in the first quarter was $1,161, with PowerBooks at $2,140 and iBooks at $1,109. Sure, Apple flogs low-grade eMacs to schools at bargain-basement prices -- but they have big, fat CRT monitors. Ugh. You say the iPod, priced from $250 to nearly $500, proves that Apple can charge a premium for superior design. I disagree. What makes the iPod so hot in the consumer market is superior technology -- the first workable user interface on a digital music player. That's the reason why the premium has stuck, not the nifty form factor or funky colors. Yes, Apple's operating system has some ease-of-use advantages compared to Windows XP. But Windows offers enough convenience for most people at a lower price. That's why it holds such a dominant market share. 2) Make 'em cool and cheap You've been to Target (TGT ), right? You probably seen the terrific product designs such as well-known architect Michael Graves' line of stylish housewares -- offered a budget prices. Heck, Blue Light Specials at Kmart (KMRT ) haven't been the same since Martha Stewart's line of kitchen gear, sheets, and towels hit the aisles several years ago. Dumpster-diving debutantes can't get enough of them. Even sportswear designer Mossimo makes great threads for fiscal lightweights. We're in the era of cheap chic, Steve. And I have no doubt that Apple can play that game with the best of them. Give us a really cheap, really cool PC, and watch them fly off the shelves. 3) Ditch the all-in-one mantra The iMac concept was inspiring, but consumer interest in computers with integrated monitors has never really taken off. Offer a headless Mac at a decent price with all your nifty iLife software installed, and the masses will at least give you a closer look. Then you can pull out the big marketing guns. See steps 4 and 5.
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