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Apple Aims to Grow Core With iMac G5

September 01, 2004|Terril Yue Jones | Times Staff Writer

Apple Computer Inc. on Tuesday unveiled its long-awaited iMac G5, an all-in-one device that hides its computing guts behind a thin screen perched on an aluminum foot.

Apple is counting on the new iMac to help it reverse years of market-share losses in its core business of desktop computers. Analysts said the sleeker, faster machine was likely to do the trick.

Steven Milunovich of Merrill Lynch immediately increased his profit estimate for Apple, citing the new iMac and continuing popularity of the company's iPod digital music players. John Jones of Schwab SoundView Technologies in San Francisco said that although he didn't expect an immediate sales boost, he did anticipate "a BIG December quarter" because of the iMac backlog, booming iPods and premium notebook mix.

"Desktops remain a key consumer PC leverage point, and with iMac overdue for its upgrade, we believe revenues can at least grow once again in fiscal 2005 after two down years," Jones said in a research note to investors.

Apple shares rose 37 cents, or 1%, to $34.49 on Nasdaq.

The company has been gaining share in the higher-margin laptop business, and its iPod franchise is a hit. But Apple has had trouble keeping the iMac competitive with conventional PCs from rivals like Dell Inc., Hewlett-Packard Co. and Gateway Inc.

Apple's worldwide market share in PCs fell from a peak of 9.6% in 1991 to 2% last year as computers using Microsoft Corp.'s Windows operating system continued their overwhelming dominance, according to technology market researcher IDC.

In the U.S., Apple's laptops have proved more popular than its desktop computers, garnering a 7.1% market share in the second quarter of this year, according to IDC. In desktops, its U.S. share was a paltry 2.5%.

Apple says the new iMac, formally unveiled Tuesday at a trade show in Paris, will help it win back customers. To boost their appeal, the computers have a rectangular shape and white plastic housing reminiscent of another Apple product.

"What's interesting is that it's very, very evocative of the iPod, and given the cultural phenomenon of the iPod it will be interesting to see if that carries over," said Michael Gartenberg, an analyst in New York with Jupiter Research, a consulting firm specializing in online and consumer computing.

"I suspect that a lot of people will say, 'If this is what they've done with the iPod and music, maybe I should take a look at their computers.' "

That's what Cupertino, Calif.-based Apple hopes. "A lot of interest in Apple and Mac computers is driven by the iPod," said Greg Joswiak, Apple's vice president of hardware marketing. The iPod is simple to use, and "this iMac screams simplicity."

Apple needs a mainstream desktop computer that proves popular with consumers. Sales of iMacs in the first six months of this year fell 15.3% to 460,000 compared with 543,000 in the same period last year.

And sales probably will be slow in the current quarter, because Apple had to delay the introduction of the new iMac by a couple of months because of short supply of the G5 microprocessors, made by IBM Corp.

The iMacs will be available mid-September. The 17-inch screen with a 1.6-gigahertz microprocessor, 80 gigabytes of memory and a combo drive that records CDs and views DVDs will carry a price tag of $1,299; the 17-inch model with a 1.8-GHz chip and a "SuperDrive" that also records DVDs will cost $1,499; and the 20-inch iMac with the faster chip and a 160-GB hard drive will cost $1,899.

For this iteration of the iMac, Apple designers carved away unnecessary space and casings, eliminating four pounds from the 17-inch version and a hefty 15 pounds from the 20-inch iMac.

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