Apple Takes It on the Chin in FY2001

Apple really took it on the chin during fiscal 2001 - income down 33%, unit sales down 32%, and a net loss of $25 million. Is it time to polish the apple again?

Power Mac sales were at their lowest level since 1997, when Apple sold 981 thousand units. That jumped to 1.266 million in 1998, inched up to 1.296 million in 1999, and edged up a bit more to 1.329 million in FY 2000. This year, Power Mac sales dropped to 937 thousand units.

PowerBook sales have also declined, in good part due to the introduction of better iBooks. PowerBook sales were 417 thousand in 1997, rose to 427 thousand in 1998, dropped 19% to 344 thousand in 1999, climbed to 383 thousand in 2000, and dropped 10% to 346 thousand in 2001.

The iBook has been Apple's success story: They sold just 6 thousand units in fiscal 1999, 545 thousand in 2000, and raised that to 596 thousand in FY 2001. Between then, the iBook and TiBook accounted for 942 thousand units - well over twice Apple's PowerBook level prior to the iBook's introduction.

The iMac is getting long in tooth. It arrived in August 1998, eclipsing the earlier Performa models. During 1999, Apple moved 1.8 million iMacs, followed by 2.2 million in 2000. This year? A dismal 1.2 million units. Ouch.

In total unit sales, Apple moved 2.87 million Macs in 1997, 2.76 million in 1998, 3.45 million in 1999, and a very impressive 4.56 million in 2000. That dropped 32% in 2001 to 3.09 million units.

The numbers are not good, and almost the entire personal computer industry is taking it on the chin. Apple's loss of $25 million is actually a pretty good showing in this climate.

Still, it's depressing to see sales drops in three of four categories. We'd better hope the iPod is a huge success and some new models are introduced at Macworld Expo to help Apple turn things around.

Where Next?

Apple's in a tough spot - their computers tend to last years longer than the Wintel boxen, creating a slower upgrade cycle. Where it's not uncommon for businesses using Windows machines to replace them every two or three years, four or five is the Mac norm.

Apple needs to come up with some insanely great Macs that provide a real reason to replace those beige G3s, WallStreet PowerBooks, and early iMacs - and I don't mean simply discontinuing driver support for graphics acceleration. To get people with 233-333 MHz Macs to upgrade, Apple has to offer them 3-4 times the power. Anything less is inconsequential.

Apple has done admirably on the desktop front, pushing the Power Mac to 867 MHz - that's nearly 3x the clock speed of the old beige G3/300. Ditto for the iMac, which at 700 MHz is 3x the speed of the Bondi original - but just a bit over twice the speed of the Revision D.

On the PowerBook front, the G4/667 offers a bit over twice the performance of the 292 and 300 MHz WallStreet models - not a huge incentive to upgrade.

This is all a consequence of Motorola falling behind Moore's Law, which predicts a doubling of computing power every 18 months or so. Between 1998 and the end of 2001, we should have seen Macs move from 233-300 MHz models to 933 MHz to 1.2 GHz ones at a minimum.

There are a lot of rumors about Macworld Expo. One of the most persistent is a flat panel iMac, which might give the iMac a shot in the arm - but only if that's coupled with speeds in the 700 MHz to 1 GHz range. And that's going to require faster Power Macs.

The other persistent rumor is that the PowerPC G5 may be ready to debut at speeds ranging from 1.2 to 1.6 GHz. True or not, Apple definitely needs to offer at least one model running at over 1 GHz in the era of 2 GHz Pentium 4s and Athlons - not to mention 1 GHz and faster entry-level Celeron and Duron machines.

The TiBook was a stunning success not because it was titanium or thin or even because it had a G4. Nice, but I'm convinced the reason people bought the TiBook was for the stunning 1152 x 768 "megawide" display - everything else was secondary. A year later, the display isn't enough to convince people they need a TiBook, especially with the iBook running at 600 MHz with a 1024 x 768 display.

Although Apple has demonstrated it can sell new computers to Windows users, it's hard for them to believe Macs might have decent performance when they range in speed from 500 to 867 MHz. These speeds are also a disincentive for existing Mac users to upgrade - and existing Mac users remain Apple's most faithful audience.

Whether they use a faster G4 or a brand new G5, the new Power Macs need to break well past the 1 GHz mark. If Apple can offer single- and dual-processor 1.2 GHz Power Macs, a lot of power users and designers will find ways to justify the expense.

As for the iMac, most users aren't going to buy one just because they may have a flat panel display. They will buy for a significant increase in performance, and that means the entry level iMac should run at no less than 700 MHz. Flat panel or not, performance is the leading enticement to replace an older Mac.

We can say the same for the iBook. While 600 MHz is a comfortable performance level, it's not a big enough boost if you're already at 300 MHz.

The recent TiBook speed bump should also pale in comparison to the next generation, whether introduced at Macworld Expo this January or later. Here's what I'd hope to see from Apple no later than April 2002.

• Power Mac at 1.0-1.4 GHz, including a dual 1.4 GHz model
• iMac at 800 MHz to 1 GHz
• PowerBook at 800 MHz to 1.2 GHz
• iBook at 800 MHz to 1 GHz

IBM was demonstrating a 1.1 GHz PowerPC processor years ago, so there's nothing the least bit unrealistic about these numbers. Best of all, they'll offer the increased level of performance real world Mac users need to justify buying new - a minimum of 3x the current performance level.

Then maybe Apple can entice those with 3-5 year old Macs and grow unit sales in fiscal 2002.