Apple’s New Crop : Computer Maker Is Staking Its Future on PowerPC Models
Apple Computer Inc.’s launch next Monday of a new line of Macintoshes using the nimble PowerPC chip will put the company on the threshold of a dream--or a marketing disaster.
The move marks a treacherous turning point for the maker of the venerable Mac, now more than a decade old and showing signs of wear. To salvage its tarnished image as a leading-edge personal computer company, industry observers say, Apple needs a high-powered winner on which to stake its future.
“Apple really understands how important this is,” said Ken Krich, president of ComputerWare, a Bay Area computer retailer that carries only Apple products. “If they foul it up, they’re history.”
So far, Apple’s new Power Macs have been winning a fair number of accolades from trade reviewers. But whether Apple can translate critical acclaim into robust sales is far from clear, analysts say. What is obvious is that the company has set itself some formidable tasks fraught with opportunities for bungling.
The Silicon Valley champion of user-friendly equipment must woo customers and software developers to an entirely new technology without trashing sales of older Mac models scheduled to be phased out over the next three years. It must also keep current Mac devotees happy while somehow luring converts from machines that run Microsoft’s Windows and MS-DOS software--in other words, the overwhelming majority of PCs.
Accompanied by more than the usual hype, the Power Mac machines will vie with similarly powerful--but more expensive--rivals featuring Pentium chips from Intel Corp., the global leader in semiconductors. By industry estimates, Intel chips supply the “brains” for at least 80% of the estimated 125 million computers in use worldwide. Users of Macintosh machines, which run on Motorola microprocessors, number about 11 million.
The PowerPC has some advantages over Pentium: It consumes less power, making it ideal for portables, the hottest growth market. And early trade feedback indicates that the machines offer the muscular performance needed for emerging technologies requiring voice recognition, 3-D modeling and the manipulation of video, sound and graphics.
A chief disadvantage is that a rich lode of software designed specifically for the PowerPC to make best use of its speed won’t be available for months or even years. Only between 50 and 100 such software titles will be ready at introduction.
Without a trove of software, persuading users to trade up from the current Macs or switch from the Intel-Windows environment could prove daunting.
“It’s going to be difficult for them to expand market share tremendously,” said Linley Gwennap, editor of Microprocessor Report, a trade newsletter based in Sebastopol, Calif.
Nonetheless, Apple executives in Cupertino are boldly predicting that they will do just that. Ian W. Diery, Apple’s executive vice president of worldwide sales and marketing, plans on a jump of five percentage points over three to five years, from Apple’s current global share of 10% or so.
“We’re betting the ranch, as they say in America, on this transition,” said the Australia-born Diery.
Although Apple won’t say how much its new machines will cost, scuttlebutt puts them at a competitive $2,000 to $5,000--a rare chance for Apple to be a price leader, said Bruce Lupatkin, an analyst with the Hambrecht & Quist investment firm in San Francisco.
Comparable Pentium machines, now selling for about $3,000, will probably drop to $2,000 by year-end, thanks to price cuts by Intel.
To further counter any perceived edge for Apple, Intel on Monday unveiled far faster versions of the Pentium and has geared up a splashy ad campaign capitalizing on its familiar “Intel inside” theme. Computer makers such as Hewlett-Packard, AST Research and Gateway 2000 say they plan to ship PCs using a souped-up Intel chip as early as next month, priced from $3,500 to $5,000.
In this way, consumers can expect to see new generations of Pentium and PowerPC chips playing leapfrog for months to come.
Such competition “keeps us on our toes,” said Curt Nichols, marketing director for Intel’s Pentium processor division.
For Apple--which last year endured 2,500 disheartening layoffs, the ouster of Chairman John F. Sculley and the botched debut of its Newton hand-held computer--the Power Macintoshes are providing a much needed morale lift.
“PowerPC is one of the few lights at the end of the tunnel keeping people pretty excited,” said Kenneth Lim, who resigned in January as Apple’s chief futurist to start an interactive-media consulting firm.
The PowerPC microprocessor is the product of a groundbreaking alliance, announced three years ago, among IBM, Motorola and Apple. It represents Intel’s first significant competition in years, most analysts agree.
The chips feature reduced instruction set computing, or RISC, which is Silicon Valley-ese for a technology that boosts processing speed by giving the computer fewer and simpler instructions. The PowerPC’s greater simplicity and smaller size make it cheaper to manufacture than Intel’s chips.
Apple’s Power Mac design team worked hard to ensure the loyalty of Macintosh users. Packages to help Mac users upgrade to PowerPC capabilities will be plentiful. And tests by Apple and outsiders indicate that 93% to 98% of existing Mac software will run flawlessly on the new machines.
“That is a huge relief,” said James S. Gable, Apple’s product line manager for the PowerPC. “It will make it easy for people to switch over.”
Despite the generally favorable publicity about PowerPC, investor enthusiasm has seemed elusive. Apple shares closed Wednesday at $37.50 in Nasdaq trading, down from about $60 last spring.
Even Apple fans fear the company will have trouble living up to the expectations it has created. And few expect it to make much headway in corporate America.
Regardless, everyone agrees that Apple’s fate hinges on a smooth transition. Said Mark Hall, editor of MacWeek magazine in San Francisco: “Apple’s reputation as a high-tech leader will rest on the success of the PowerPC.”
