Apple needs to take a financial risk with the new G5 iMac and show the world that Apple is still a major force in desktop computing.
I was as excited as anyone with the positive earnings announcement Apple presented this quarter but there was something in there that has me worried. This idea that the G5 (970fx) chip will be constrained through the rest of the year. This is a major concern, because it limits the number of systems Apple can ship and may even further delay any hopes of a G5 PowerBook (which will be a huge money maker when it ships).
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Apple needs to take a financial risk with the new G5 iMac and show the world that Apple is still a major force in desktop computing.
I was as excited as anyone with the positive earnings announcement Apple presented this quarter but there was something in there that has me worried. This idea that the G5 (970fx) chip will be constrained through the rest of the year. This is a major concern, because it limits the number of systems Apple can ship and may even further delay any hopes of a G5 PowerBook (which will be a huge money maker when it ships).
What can Apple do about IBM’s problems? Maybe nothing, and I accept that. It is possible that the 970fx chip is a true number one priority for IBM and nothing Apple does will change that. But what are the odds? I’d say it is more likely that IBM is putting as much effort into the 970fx as it feels the project deserves. If this is the case then Apple could make the processor more important by buying a bunch more of them.
Last quarter, Apple sold around 300,000 G5 chips and I’m sure they expect to increase that number this quarter to as much as 500,000. But what if Apple committed to purchase one million 970fx chips this quarter and 1.5 million the following quarter? Would that get IBM’s attention? If yields were good enough the price of the 970fx should drop significantly.
Even these numbers may be very conservative for what it would take to really get IBM moving on the G5 and maybe I’m wacky to think Apple could increase sales that much, but think about it this way…
The PowerMac line features all dual G5’s and without the chip shortages you would expect that Apple could ship over 200,000 units. Remember that G5s are very high margin systems, partially because of the limited number of chips. Apple will sell all of the G5 towers it can make next quarter, so why drop the price if chips aren’t constrained? How easy would it be for Apple to lower the price and move 250-300,000 units? This equates to 500-600k CPU chips.
We also know that the iMac (and maybe the eMac) will sport a G5 chip sometime in the not-too-distant future. Apple sold nearly a half million bondi blue iMacs in their first quarter. So if the price was right, I’d think a half million iMac G5 could be sold.
The following quarter (if chip constraints were not an issue) Apple could bring out the PowerBook G5 and the combination of these sales plus the continued increase in other G5 sales could make up that additional half million CPU’s…. or so my theory goes.
So how cheap would the new iMac have to be? What would it have to be? Well I liked the dome design and the swing arm mounted monitor but I’m willing to believe that is not going to happen. Instead, I see a micro tower that may be able to attach to the mounting bracket of the existing LCD (20, 23 or 30″ iMac, your choice!) I’m also guessing that a 17″ LCD display will be made available to keep things reasonable and maybe even a custom CRT (so long eMac).
The specs can be deducted from the current eMac (as the iMac is simply over priced and out of date). If you remove the US$200 CRT, you can get the core of an eMac for US$599 with a combo drive 40GB Hard Drive, 256MB RAM and an ATI graphics card. I would like to see a slightly higher price point with at 1.8GHz G5, 80GB hard drive, 512MB RAM and an nVidia 5200 Ultra (please – in a standard AGP slot) combo drive US$799 (US$999 for the SuperDrive and 160GB HD configuration). This unit with a 17″ CRT would replace the school system at US$999.
With a 17-inch LCD (US$600?) it would replace the entry level iMac at US$1399. Symbolically I would rather see this price at US$1299 to draw a comparison to the original iMac but I also don’t want a cheap monitor. With a 20-inch LCD US$2099, which I would hope would fall to US$1999.
But for any of this to happen Apple has to believe that they can double sales in a single quarter simply by pricing their systems right. They need to be willing to sacrifice earnings for a quarter to potentially get earnings for years.
Apple has everyone’s attention right now. People who know nothing about Macs know about OS X and iLife. Many of the Linux geeks are curious about Mac OS X and Xcode but don’t want to spend a couple grand to see it. Businesses who know of the power of Unix but have had difficult with Linux are wondering what the Xserves can really do. There are a lot of opportunities to sell Macs out side of the traditional Mac base if Apple can just make the price/performance equation look attractive enough.
