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MAY 21, 2003
By Alex Salkever Will This Be the Summer of Mac? [Page 2 of 2] TWIN INCENTIVES. The second key factor to watch is Quark. The most popular graphics application for Apple has never made the transition from OS 9 to OS X. It's still wedded to the legacy operating system that Apple no longer ships. Big problem for Apple. The PowerMac desktops most often used to run Quark sell for high prices and give Apple its fattest margins. But with no new version of Quark on the market, graphics shops have felt less pressure to upgrade. And the slow-chip problem has reinforced their reluctance. In fact, top-end Apple buyers seem to have lost interest in the existing line of PowerMacs. Apple executives noted in the latest earnings briefing that big price cuts on existing PowerMacs didn't budge the sales numbers. Yet, help may be on the way. Quark is signaling that it might soon release an OS X version. No guarantees and no dates, to be sure. But there's talk of an announcement timed around MacWorld in July. A new Quark release will mean new customers for an improved PowerMac line. And the twin incentives of Quark and faster chips are far stronger than either single offering alone and could boost revenues for Jobs & Co. SWEET MUSIC. The nascent, Net-driven recovery in the graphics and advertising business is another important factor. While advertising in traditional media remains lackluster, online advertising is growing at a double-digit clip. Apple owns the graphics and advertising sector. And any uptick there will likely pour cash into Apple's coffers, since many graphics companies running three-year-old hardware are itching to upgrade as soon as revenues start trending back upward. Music, too, could make profits dance. After rolling out iTunes 4 -- which offers 99-cent, no-subscription, no-strings downloads, Apple sold 2 million tunes in the first two weeks. Since the money is also divided between labels and artists, Apple's take will be considerably less than $2 million. But it could see cash flow as soon as the end of this summer. Much of the infrastructure for iTunes 4 was in Apple's big .Mac effort to provide easy Web publishing tools, remote storage, antivirus, and e-mail services to Apple users. So the incremental startup cost was probably far less than for other online music businesses that had to build everything from scratch. Granted, Apple's traditional core strength, the education market, continues to erode: Apple now has only a 14% share of new-computer purchases in the sector, down from 27% three years ago. Crushing budget deficits at schools and universities around the country won't help. ADDING IT UP. Furthermore, Apple faces a large overhang of stock options awarded to employees. That could hurt shareholders down the road when Apple employees and execs buy these options and, suddenly, the pool of Apple shares on the market grows considerably larger. While Apple continues to claim that 50% of all people buying new computers at their company stores previously never owned a Mac, the Cupertino crew hasn't shown any major market-share gains yet. Nevertheless, I think the positive developments outweigh any negatives right now. Given the unique advantages in each market, an Apple resurgence need not be tied to a broad PC recovery. So add up the benefits from promising new chips, an OS X version of Quark, a rebounding online ad market, and, oh yes, a rocking music store, and Apple could outpace many other PC makers in the months ahead.
 Salkever, Technology editor for BusinessWeek Online, is filling in while regular Byte of the Apple columnist Charles Haddad is on leave Edited by B. Kite Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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