Apple walks tightrope, begins Jaguar hype

Whither the iPod?

Some interesting sidenotes emerged from Apple's analyst call yesterday, in which the company posted a $40 million net profit.

Like other vendors, Apple is walking a tightrope with its profit margins, as memory and flat panel display prices fluctuate wildly, mostly in a northerly direction.

Apple has a keener interest in these two than most, as its new default OS soaks up more memory, and it's banking on LCD monitors on its consumer line with the lampshade-style new iMac. But such is demand for new kit among Apple devotees, that the company could confidently add $100 to the price of the new iMac without reporting a drop-off in demand.

Its confidence can be justified: the new iMac was fairly keenly priced to begin with, and for despite its clinical, dentist-room aesthetics, it's a unique design in the market. Apple said it shipped 220,000 in the quarter, despite widely reported availability problems.

Apple reported that gross margins edged up slightly to 27.4 per cent from 26.9 per cent in the corresponding quarter last year. A far cry from the 50-plus per cent of the glory days, but actually much more impressive than it sounds: the venerable original CRT-based iMac was a nice little earner: despite its low retail price, it used near obsolete-CRT display technology and the very low cost G3 processor. So Apple was still making decent money on each one.

And the big, high-margin earner in recent years have been notebooks, and despite speed bumps at price cuts announced at MacWorld, Apple didn't radically overhaul either the PowerBook or iBook ranges. PowerBook sales fell from 116,000 and to 89,000 and iBook sales from 185,000 to 141,000 units.

But overall, these earnings then are more impressive than they appear at first glance, and are a tribute to good management and the continuing loyalty of the Mac user base.

However the company said that it expected LCD prices to continue to rise, more than offsetting any gains from falling memory prices, so margins would head South slightly in the future, before recovering later in the year.

Whither the iPod?
Apple saw a 50 per cent drop in demand for the Mac-only MP3 player, the iPod, launched to great fanfare, and to mixed reviews only last October. Apple CFO Fred Anderson defended the figures, and said other MP3 manufacturers had seen steeper declines.

But there may be another issue which the company needs to address, and that's keeping the iPod up to date. For our money, it's a wonderful addition to the Apple range: it unfailingly wows our PC friends - particularly former Mac users who defected - it exploits the Mac's built-in FireWire capabilities and iTunes software very sweetly, and the company is completely correct in ensuring that it's a Mac-only accessory (officially, at least). But it isn't being refreshed often enough, and only weeks ago did Apple introduce a 10GB version. A 20GB model ought to be available now, given that the drives are here, and that's the conundrum: consumers are more pernickety about their accessories than their choice of PC platform. It's a more promiscuous market with a lot more churn. While we doubt that Apple makes much money from the iPods, the device makes the Mac a whole heap more attractive.

OS X update

Preceding the financial statement - in fact, while we were still beetling around glorious Arizona on vacation - Apple issued a press release trailing the next major update to OS X, Jaguar. This release will be the one that urgently needs to fix the UI and performance issues that keep us from using such wonders as Cocoa AppleScript studio on a daily basis. A May preview at Apple's WorldWide Developer Conference should give it a around a month to clean up bugs before its vital education users need to install it in time for the start of the Fall semester. That's a deadline Apple can't miss. ®

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