Apple Computer Inc. will open 25 retail stores this year in its first attempt at running neighborhood computer shops, including one set to open Saturday at the Glendale Galleria.
Three more Apple stores are expected in the Los Angeles area later this year.
Apple sells only 5% of the nation's desktop computers, the vast majority of which use Microsoft Corp.'s Windows operating system. Apple Chief Executive Steve Jobs has been an increasingly vocal critic of traditional computer retailers that often give less attention to Apple products.
But the move comes as U.S. desktop computer sales this year are off 25% from last year and many retailers are struggling to survive. California chain ComputerWare, once the largest Apple retailer in the nation, closed its doors in April. PC makers also are struggling because they have to slash prices to try to hold on to market share given the industrywide slowdown.
Gateway Inc., which grew rapidly by selling computers directly to consumers via phone and online orders, stumbled after establishing mall storefronts to showcase its products. Gateway recently announced it would shutter about 10% of its 300 stores. And Gateway had to set aside $122 million to cover consumer loan losses last year.
Despite the hazards of retailing, some analysts think Apple is making a smart move.
"Apple is a niche player in a mass-market category," said Stephen Baker, research director for NPD Intelect, a market research firm headquartered in Port Washington, N.Y. "In a standard retail environment, they get lost in the store. . . . The [new] Apple stores let them . . . brand themselves more strongly, underscoring Apple's unique style, presence and panache."
But the company runs the risk of alienating--or even shutting down--retailers that rely on sales of Apple hardware to stay in business. Some Apple-oriented shops say they're not worried because they make most of their money through service and support, but others say Apple's new strategy could hit them hard.
"We are very concerned," said Larry Moon, vice president of Di-No Computers in Pasadena, which sells only Apple-related products and is less than 10 miles from Apple's planned Glendale store.
"We've been in the same location for 23 years. We sell $10 million worth of products every year--that's third-party Apple products and the Apple products--and we can't make up product losses," Moon said.
In public statements Tuesday, Jobs insisted that the new strategy wouldn't significantly affect Apple retailers and that the new stores would be profitable by 2002.
Apple shares closed at $23.18 on Tuesday, down 11 cents, on Nasdaq.