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September 14, 2000

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Subject:  Taking stock in AAPL
Author:  Standabove

Did anyone catch Jobs saying that AAPL had shipped "tens of thousands" of Cubes thus far? This in response to a question concerning the tight supply of Cubes in stores. Said Jobs, "If they're in short supply, it because they're selling better than we had anticipated."

I think at this early stage the Cube can best be viewed as a huge success, confounding the critics yet again. All retail reports of iMac sales show strong demand across the entire line, especially at the mid � high priced DV lines. Gee, it was pretty cute of AAPL to refuse to sell the really cheap $799 iMac until after back to school shoppers had done their damage.

Now we have the new iBooks. At the risk of repeating myself, these things rock. Besides the color improvement (I never got behind the tangerine), I don't really see that there is a better portable computer value out there. These things will sell very well.

So, we have very strong sales across three of five major product lines. G4 sales are unknown (at least to me) and we'll have to wait and see if Cube sales are eating G4 sales. PB sales are probably on the decline and will become more so with the new iBooks. Then there are monitor sales. It will be interesting to see how Cube sales correlate to new purchases of Apple monitors, since Cube buyers are probably more likely to consider the matching monitor essential to the entire package than G4 buyers. We also have the revenue from Keyboards, iMice, and iMovie 2 sales. Not likely to be huge, but definitely a nice garnish to our Apple entr�e.

Current analyst estimates call for $.45 this quarter - exactly the same as last quarter. I think the street is in for a rude awakening come the 18th of October. I'm so convinced the estimates are off that I'm contemplating increasing my AAPL stake in anticipation of not only this quarter, but a great x-mas as well.

Now we have OSX. The key to making this product appeal to the first time Mac buyer is to establish it as a singular, monumental improvement to the home computer. Most everyone agrees that WinME is pretty much Win98 with a shiny new coat of paint. And Win98 was just an incremental upgrade to Win95, which was just a DOS with pictures. And we all know that DOS was just Banging Your Head With A Steel Pipe v2.0.

Notice that in recent Mac ads, the emphasis is neither on the OS per se, nor the hardware per se. Instead the focus is on creating a Macintosh brand. Per se. It's been a pretty effective campaign, too. For all of you people fixated on MHz who can't understand why some people buy a Mac that is maybe more expensive, you need to understand that AAPL doesn't sell computers. AAPL sells Macintosh� Computers. Just like Starbucks doesn't sell coffee and McDonalds doesn't sell hamburgers.

So, Apple has focused on selling the complete product, the package deal. PC's are distinguished only by features and price, where as Macs have the only really definable product image in the computing space. Both the OS and the hardware are part of this image and pretty much inseparable in the minds of consumers.

So, if AAPL is to make OSX the key to first time buyers, it must distinguish the product on its own. OSX will likely convert some fence sitters who are adept at monkeying around with the Unix like features of OSX, but unless OSX can say "I am a superior alternative to Windows" I just don't know if can bring people off the street. Of coarse, AAPL may not need to use OSX to draw new users. They can continue to build innovative new products, like the Cube, of which the new OS is a part.

Is OSX a "killer ap"? You tell me.


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