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The Reasons for Architosh

Caught in the cross-fire over Enterprise: Why AEC Suffers

Five Things for a Great Apple-branded ISP


The Price of Success: Apple's new problem
by: Anthony Frausto-Robledo ([email protected])

By now many of you are hearing about Apple's disappointing financial projection for the fourth quarter of 1999. They are now only expecting earnings (that's profit folks) of $75-$85 million. The stock took a major tumble yesterday on news of the projection, shortly after the stock reached yet again another Apple stock record. Wow! what unfortunate timing...just when everybody was riding high on Apple's incredible comeback performance, riding high on their new found stability, and riding even higher on their incredible Fall lineup. Bam! a G4 chip shortage crisis. And suddenly a lower than projected performance.

Is this news disappointing? Yes. Does it make you want to cry? Maybe, if your an Apple retailer. Should any of us Mac folks lose sleep over this? Maybe, but I'm not and I don't think you should either. Let's face it, this is just part of the problem of the price of success. So get over it, please! Analysts may work themselves into a frenzy over this, PC-pundits and anti-Mac soldiers will certainly say, "I told you so!", and even the main stream press may make big kaboo over this but it's hardly not worth it. And for Mac folks, it's just best to go about your business being Mac folks.

"We are very disappointed that deliveries of G4 processors will be lower than planned. Orders for the Power Mac G4 have been strong and we anticipate ending the September quarter with a substantial backlog." -- Apple CFO, Fred Anderson

It's truly unfortunate that Apple wont make that additional $85 million or more they might have if all the G4's they could swallow were available. It's truly too bad. Yet what are we talking about here? It's about not having enough of something that more people want then ever before. One of the seasonal pit falls that a successful Apple might now have is a constraint on orders during the fourth quarter and first quarter of the next year. This is back-to-school season and the holiday season is right around the corner. With such a stellar product lineup -- easily the best lineup Apple has ever had ever -- it only seems natural that Apple would struggle meeting demand. And in this case it appears to not be Apple, per say, that is not able to produce but Motorola's processor division.

The G4 and Timing: Apple's not entirely to blame

You have to admit, introducing a new chip at this time of the year is probably not the "smartest" move. These are Apple's strongest quarters (back-to-school and holiday season quarters). Every chip maker struggles to produce enough of a new processor when that processor offers big advances. Intel and AMD struggle with this problem all the time. It may be justified in criticizing Apple for the tardy G4 introduction, putting it into this quarter, but it isn't justifiable to criticize Apple for Motorola's current problem -- a problem every chip maker goes through from time-to-time.

"Apple has received orders for over 150,000 Power Mac G4's since the product was introduced three weeks ago, and we regret that we will not be able to ship them all this quarter." -- Apple iCEO, Steve Jobs

Some in the Mac and PC press have forewarned us about this possible situation. Since Motorola is going to be the sole provider of G4's with AltiVec -- at least for awhile until IBM gets their butt in gear and gets onboard with AltiVec as well -- Apple may have troubles meeting supply and demand whenever Motorola gets a hiccup in their assembly lines. This is the case now. Perhaps the only thing that Mac folks can do is to encourage IBM to go forward with AltiVec and to encourage Apple to work out fallback positions with IBM and Motorola so that when such problems arise they have more than one route to go. Yet, one has to remember that 90 percent of the PC world get's their chips from one supplier as well: Intel. What's the difference? The AIM alliance is still as committed to the PowerPC as every before (maybe more so than in the past) and this chip shortage is nothing more than the natural fallout of ramping up for a new processor. Big deal.

The G4: It 's going to be huge

The G4 is going to be one of their all-time most popular machines. As Steve Jobs said in their media release, "Apple has received orders for over 150,000 Power Mac G4's since the product was introduced three weeks ago, and we regret that we will not be able to ship them all this quarter." Let's digest that number for a moment: 150,000 orders in three weeks. That is HUGE! We're talking SUPER HUGE! That's a much faster rate of preorders than the iBook or the iMac. How many of these machines will Apple be able to ship by December 31st.? If that number in just three weeks is any indication, Apple won't be able to meet demand until sometime next year; and I would not be surprised at all if Apple shipped 500,000 G4's by January 1, 2000, if -- and this is a big if -- Motorola can produce as many chips.

I went to get a G4 last weekend at the local Microcenter computer store. They were all gone, except for one display unit. I overheard a sales associate telling a customer that they went so fast that they hardly ever had them. More were coming but they knew they would be snatched up just as quickly. I thought going to a local store would be a sure deal so that I'd avoid the long Apple Store delivery dates. No such luck. If you want a G4 you better get in line with the rest of us!

If that's how one could describe the problem Apple is currently in, well then I have just one thing to say: that Apple stock drop yesterday just made that stock a bargain!


Anthony Frausto-Robledo, B.Arch., Founder & Publisher
Cambridge, Mass.



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