TidBITS#502/18-Oct-99 ===================== Bitter about Apple's speed reductions for the Power Mac G4 line, or merely confused about what's happening? Matt Deatherage examines the hullabaloo to determine what went wrong and why. Adam reports back from a day at Internet World, and in the news we cover Apple's $111 million quarterly profit and the releases of Keyspan's Digital Media Remote, Action Files 1.5, and SoundJam MP 1.1.1. This week's poll: How much does digital video editing interest you? Topics: MailBITS/18-Oct-99 Report from Internet World NY 1999 Speed Dips for Power Mac G4s Copyright 1999 TidBITS Electronic Publishing. All rights reserved. Information: Comments: --------------------------------------------------------------- This issue of TidBITS sponsored in part by: * READERS LIKE YOU! You can help support TidBITS via our voluntary <- NEW! contribution program. 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Visit us on the Web at or call 800/527-1914. * NEW 16 PORT MODEL! Network your 10Base-T & 100Base-T devices <----- NEW! with Farallon's 8, 16, & 24 port FAST STARLET DUAL SPEED HUBS. All hubs come with lifetime warranty & free technical support. * ~ Internet Radio Software <---------------------------------------- NEW! Live Weather Software News, Sports, Stocks - Scrolling Ticker Software ... all at the MacAlive Store .... * THE INTERNET'S DISCOUNT MAC SUPERSTORE! --> 999mac.com All new from Aladdin! Shrink Wrap, Private File, StuffIt and more. TidBITS customers special: buy 2 Get 1 Free! Tons of new products! --------------------------------------------------------------- MailBITS/18-Oct-99 ------------------ **Apple Posts $111 Million Profit** -- Apple Computer announced a net profit of $111 million on $1.34 billion in revenue for its fourth fiscal quarter, with earnings of $601 million on $6.1 billion in revenue for the 1999 fiscal year. Apple's Q4 results were down 14 percent from the same quarter a year ago, but Apple's 1999 revenue and earnings were up from 1998, which had earnings of $309 million on $5.9 billion in revenue. Apple's gross margin for its fourth quarter was a healthy 28.7 percent, but the Q4 earnings reflect one-time gains from restructuring and seemingly perpetual sales of shares in ARM Holdings plc.; without these, Apple's net profit would have been $90 million. International sales accounted for only 35 percent of Apple's revenues this quarter. Although Apple's results technically beat analysts' expectations - after issuing a warning a few weeks earlier to reduce those expectations - Apple attributes the revenue slump to costs associated with product transitions and limited availability of the PowerPC G4 processor from Motorola. Rampant rumors of new systems were another factor, causing some customers to put off purchasing decisions. Apple says it expects a strong December quarter. [GD] **Keyspan Offers Remote Control for Software** -- Keyspan is now shipping the Digital Media Remote, a small hardware transmitter/receiver combination that provides remote control capabilities for digital media playback software, such as QuickTime Player, PowerPoint, MP3 players, CD players, and DVD players. The Digital Media Remote receiver plugs into a USB port and accepts infrared signals from the 15-key remote control from up to 35 feet away. The receiver converts the signals from the remote into keystrokes for controlling applications. The Digital Media Remote includes key maps for popular applications, and you can customize the software to work with any application. The Digital Media Remote costs $79 and is available from Keyspan resellers. [ACE] **Action Files 1.5 Works with Navigation Services** -- Power On Software has released Action Files 1.5, a new update to its utility for enhancing the functionality of Open and Save dialog boxes. (See "Get a Piece of the Action Files" in TidBITS-434_ for a review of Action Files 1.0.) Version 1.5 integrates with Navigation Services (the enhanced file dialogs that Apple introduced with Mac OS 8.5), adds a selection of new features and performance enhancements, and is compatible with Mac OS 9. Action Files 1.5 also integrates recent and favorite items with Action Menus, another Power On utility derived from the Now Menus component of the now-defunct Now Utilities package. Current owners of Action Files can update to version 1.5 for free (it's a 2.1 MB download); otherwise, an electronic version of Action Files 1.5 costs $30 from Power On, and CD-ROM versions are available from Power On and other vendors for $40. [GD] **SoundJam MP 1.1.1 Adds Mac OS 9 Support** -- Casady & Greene has released SoundJam MP 1.1.1, a free update to the company's all-in- one MP3 player and encoder (see "That MP3eaceful, Easy Feeling, Part 2" in TidBITS-501_). Despite the small version increment from 1.1, SoundJam incorporates a number of changes and bug fixes. Most important, SoundJam 1.1.1 offers compatibility with Mac OS 9, improved encoding options, enhanced shuffle ordering, support for multiple tracks in certain streams, and a Get Info command for the current song in the Player window. The update is a 1.5 MB download. [ACE] **Quiz Results: Apple's International Sales** -- Last week's quiz testing your knowledge of the percentage of Apple's sales from countries other than the United States was tripped up by Apple's mid-week announcement of quarterly results. In Apple's third fiscal quarter of the year, international sales accounted for 45 percent of Apple's sales, but in the just-closed fourth quarter, that percentage dropped to 35 percent. The drop was likely related to Apple's availability problems with the iBook and Power Mac G4 machines, and perhaps to increased education sales, which come primarily in the U.S. Roughly 45 percent of readers knew the "correct" answer, with 32 percent guessing high and 22 percent guessing low. [ACE] **Poll Preview: Digital Video Editing** -- With the new iMac DV machines and iMovie software, Apple is targeting a potentially nascent market for consumers who want to edit digital video. Previous attempts to tap the market, as with the Performa 6400 video editing systems, failed to catch on. So the poll question on our home page this week is, how appealing do you find the iMac DV's digital video capabilities? [ACE] Report from Internet World NY 1999 ---------------------------------- by Adam C. Engst Last week I spent a day at the Internet World trade show in New York City's Jacob Javits Convention Center, the same venue that has hosted recent Macworld Expositions in July. It was an interesting experience, and I found it even more so when I went back and read Matt Neuburg's report from 1997's Internet World in Los Angeles. I was initially struck by the show's size. Two and a half years ago, Matt commented on the sparse attendance, but last week's Internet World was huge, taking up perhaps three to four times the space used by Macworld Expo and filling much of that space with attendees. I suppose it's not surprising: the Internet has not only grown at its standard breakneck pace, it's become ever more driven by large businesses and the consumer masses. **Common Themes** -- Business turned out to be the common denominator for the show, with seemingly every booth trying to fit "ecommerce" into the description of their company or product - the number of ecommerce tools and services was astonishing. Almost all claimed to have "complete solutions," but even cursory glances at product information or snippets of overheard questions indicated that many of these claims were probably overblown. A few other themes appeared - judging from the number of booths pushing such products, someone believes that audio email will be a big deal. Personally, I can't see it happening. Eudora Pro has included the PureVoice plug-in for sending audio email for some time and in my testing it combines the worst aspects of email with the worst aspects of voice mail. I'm sure many of these products are technically impressive, but I don't see what problem audio email solves that people are willing to suffer its trade-offs - large file size, no way to search the contents, and a lack of meta-information that makes scanning and archiving difficult. Several firms were on the cusp of announcing gift registry services, which intrigued me, since I've been procrastinating for years about creating a database for my family to share gift ideas. Some of my design goals were more than these gift registry services could handle currently - like making sure people couldn't see gifts suggested or already purchased for them by others - but I suspect that within a year or so, we'll have extremely sophisticated ways of making and sharing wish lists. Many booths advertised products or services promising to help you create "community" around your Web site. These companies didn't seem to understand that communities evolve organically around shared interests. Good tools enhance an existing community, but community happens only when people congregate, not when someone implements a Web-based message board. Simple tools - such as mailing lists - suffice if enough people are interested in acting as though they're in a community. **Unusual Ideas** -- Although I mostly write about the Macintosh, I keep up with the Internet world through trade magazines and general contacts. Still, I was amazed at how many companies I'd never heard of, which turned out to be related in part to the number of companies that haven't shipped products. The number of unknowns, combined with the vast number of exhibitors, forced me to walk the floor quickly, stopping only when a booth managed to attract my attention. I was flummoxed by one booth and name, so I stopped - and I'm glad I did, since they had an idea I've not seen before. The company is called Savedaily.com and their goal is to help individuals save money with extremely small investments as they use the Internet to shop (there's the ecommerce tie-in!). Here's how it works. Savedaily.com has deals with over 80 large Internet merchants so that a small percentage of your purchases comes back to you in the form of purchase bonuses, which Savedaily.com invests for you in one of two mutual funds. You can also invest small amounts - as low as $5 - online in these mutual funds at any time without messing around with minimum deposits, brokers, or commission fees. I think it's a brilliant idea. Whether Savedaily.com or another firm makes it work in the long run is up in the air, since there's no telling the quality of Savedaily.com's mutual funds or the stability of Savedaily.com itself. But if the idea catches on, large investment houses might well pick up on it. Other fascinating product ideas came from InfoCharms, an MIT Media Lab spin-off that plans to market wireless wearable Internet products that integrate into fashion, lifestyle, and health applications. The InfoCharms booth had a delightfully academic feel, with people from the Media Lab and other educational institutions showing off bewitching hardware, such as a pair of glasses with a tiny 320 by 240 heads-up display attached to one lens. Their main event, which I missed, was the Brave New World Unwired Fashion Show, highlighting innovative wearable devices using the classic fashion show approach: draping them on attractive models. Though I didn't see the devices at the InfoCharms booth, I read that they plan to commercialize the meme tags I wrote about back in "Walking the Meme Streets of the ACM" in TidBITS-458_. Now called "Smart Badges," these little devices track of who you meet at a trade show and let you trade information back and forth with those people. Here's hoping Smart Badges show up soon. **Demos** -- Internet companies clearly have much more money to burn than Macintosh companies exhibiting at Macworld Expo. Giveaways and elaborate demos were common. Cable and Wireless featured an impressive presentation in which a stony-faced announcer intoned the benefits of working with Cable and Wireless while a troupe of ghostly looking performers in white juggled, danced, and cavorted on stage, synchronized perfectly with the announcer's spiel. When the announcer spoke about the reliability of Cable and Wireless's backbone network, he dropped a large silver ball into a trap door on one side of the stage, walked to the other side while saying "With our competitors, you never know what your data will look like when it's received," and promptly caught a large plastic fish that popped up from another trap door. RADWare also drew a crowd by having its demonstrator talking intelligently about the company's high end firewall, load balancing, and network monitoring products while balancing on a tall unicycle and extracting himself from a straitjacket. It's not uncommon to see both intelligent presentations or performance stunts, but the combination of the two kept the passers-by rapt. **Thinking Back** -- It's difficult to draw conclusions from my short time at Internet World. Short of Matt's article, I can't compare it to previous shows, and I get the impression that Internet World is quite different every year as some new aspect of the Internet catches fire. Still, as a spectator sport, it was worth spending the day in New York, and I'd encourage those with a strong interest in what drives the Internet to take a pass through an Internet World near you. Don't go to Internet World if you're hoping to see Apple or a significant Macintosh presence. Some companies showed products on both iMacs and PCs, but many others were PC-only, didn't support Macintosh Web browsers, or were generally Macintosh-clueless. One Windows NT security company had a sign that said "Do you worry about NT servers?" and a guy at the booth stopped me as I was reading it to ask me the same question out loud. I retained sufficient presence of mind to say that no, like the U.S. Army, I didn't worry about NT servers because I used Mac OS servers. I did have several detailed discussions over the sole Power Mac G4 in evidence, and ran into a very few Mac-industry friends on the show floor. As an example of community, I'll take Macworld Expo over Internet World any day. Speed Dips for Power Mac G4s ---------------------------- by Matt Deatherage Citing limited availability of PowerPC G4 processors from Motorola, Apple has reconfigured its Power Macintosh G4 line. The new systems are identical to those introduced on 31-Aug-99 in every way - including price - except with PowerPC G4 processors 50 MHz slower than original specifications. The low-end $1,599 model still has PCI Graphics; the two high-end models (at $2,499 and $3,499) still feature AGP Graphics, dual USB busses, faster system bandwidth, and standard DVD drives. Apple also announced that IBM will begin manufacturing G4 CPUs during the first half of 2000 for use in Apple products, which should eventually reduce Apple's reliance on Motorola as its sole source of G4 CPUs. How should we assess the changes? Customers get less value any way you look at it, but depending on your perspective you can think that Power Macintosh G4 purchasers are getting the shaft or are mild victims of circumstance. Let's examine three possible views of the situation. **The Apple Perspective** -- Apple has two simple problems with the Power Macintosh G4 line: DRAM prices have more than doubled since July, and the processors it needs to build the originally specified machines do not exist in needed quantities. The laws of supply and demand are clearly operating here. Apple is experiencing exceptionally high demand for its Power Macintosh G4 machines at current prices, but can produce only a limited supply. That means a shortage exists, a situation that normally dictates price increases: the higher a system's price, the fewer people will order one, reducing demand. Lower demand means smaller shortages. Doing nothing would mean continued backlogs, leaving customers dangling until Motorola gets its act in gear. But there's more than one way to raise prices. You can do it outright, or you can redefine the product. Apple has chosen the latter, by resetting the performance levels of the Power Macintosh models to match the three _available_ levels of PowerPC G4 chips. Yes, that's a speed reduction of 50 MHz, but Apple's question to customers should be simple: Do you want to wait for months for the system that we originally announced, or do you want an identical system _now_, except for a decrease in clock speed of about 10 percent? It's a good argument that gives the decision back to the customer, where it belongs. Apple says it can ship 500 MHz G4 systems in the first calendar quarter of the year 2000. In effect, the first Power Macintosh G4 "speed bump" will be to the originally announced speeds. Apple is no more pleased about this than its customers. In some ways, however, the move is disingenuous and driven by the high end. The former mid-range 450 MHz configurations were starting to ship in reasonable quantities, and the 400 MHz low-end systems have had decent availability for a few weeks. The "do you want it now or later?" question carries less credence for these systems because you could have had them by now at the lower prices. Letting customers decide on slower machines with faster delivery dates is a good move - and quite valid - for the high end machines that are not yet shipping. On the rest of the product line, the change just amounts to a price increase, and it's not being received well in an industry dedicated to constantly lower prices and higher performance. **The Angry Perspective** -- Customers have a right to be annoyed by Apple's reconfiguration; no matter how you look at it, customers get less machine for the same money. Last week you could walk into a CompUSA store and plunk down $1,599 for a 400 MHz Power Macintosh G4. This week, the same money will buy a 350 MHz model - 88 percent as fast in terms of raw clock speed - when the former 400 MHz models were already widely available. As you get to the higher end, the new pricing seems ridiculous. As a MacWEEK.com editorial put it: "Users who were prepared on Monday to pay $2,499 for a 450 MHz Power Mac G4, for example, can now pay the same amount of money for an otherwise identical 400 MHz box or pony up another $1,000 for a 450 MHz system that offers the same features they were expecting (save for an additional 128 MB of RAM)." This isn't quite accurate. Today's 450 MHz machine selling for $3,499 is not quite the same machine as yesterday's 450 MHz $2,499 model. Now that the 450 MHz pre-configured model is Apple's high- end offering, it's substantially more beefy. The new $3,499 model has 256 MB RAM instead of 128 MB; a 27 GB Ultra ATA/66 hard drive instead of a 20 GB model, built-in DVD-RAM instead of DVD-ROM, and no 56 Kbps modem you're unlikely to need. Configuring a former 450 MHz mid-range model to these beefier specifications would add $650 to the cost. Therefore, the comparison should be between a $3,149 system and a $3,499 system, not between vastly different configurations that happen to share the same microprocessor speed. Declaring that the same machines now cost $1,000 more is inaccurate by two-thirds. There's only one configuration that allows direct price comparisons - 450 MHz AGP Graphics models. The old and new configurations share only two clock rates - 400 MHz and 450 MHz - but the old 400 MHz model used PCI Graphics, and the new 400 MHz model uses AGP Graphics, frustrating direct comparison. For identically configured old and new 450 MHz AGP Graphics systems, the price differential is $350 - a 14 percent price increase. That's nothing to sneeze at, but neither does it call for revolution. Apple's subsequent move last week to cancel pending G4 orders was boneheaded. The company today reversed itself, announcing it will honor Power Macintosh G4 orders placed with Apple or resellers before 13-Oct-99, provided they were secured by some form of payment (such as a deposit or purchase order). Again, a missed opportunity - the "deposit" language makes it look like Apple is just trying to avoid legal issues, taking emphasis away from Steve Jobs's statement: "Good companies make mistakes. Great companies fix them." Even so, Apple has already significantly damaged its perception in the eyes of G4 customers, who were justifiably angry and confused at the prospect of re-ordering machines from Apple or its resellers. It didn't help that a system ordered months ago might now cost more simply because Apple hadn't decided to ship that unit yet when other people had already received machines at the old prices. Customers who ordered 400 MHz or 450 MHz systems will now receive those systems, with specifications matching the original orders, at the original price. Folks who ordered 500 MHz G4 systems will be offered an otherwise identically configured 450 MHz system at a discount of $350 - the exact price differential noted above. Apple is not accepting orders for 500 MHz systems at this time, so there are no waiting lists as reported earlier, according to a conversation today with Apple spokesperson Matt Hutchison. **The Analytical Perspective** -- Somewhere between the rock and the hard place are the difficult problems Apple is trying to solve with its non-intuitive moves. The company faces huge demand for machines it can't produce. If it sits on the existing configurations, it delays revenue for another quarter and potentially loses sales from customers who want high-end performance now. The only way to fill the orders is to eliminate the supply problem and switch to chips it can buy. Apple can't afford to reduce demand artificially by de-emphasizing Power Macintosh G4 models, since market share is still key to Apple's public perception. Yet rising DRAM prices are also squeezing the company. If Apple reduced price with processor speed, it would have a huge backlog of low-cost machines with expensive RAM that don't generate the profits it needs to meet its business plan. Apple can't afford to turn its highest-margin product line into a low-margin system for which it can't meet orders. From a customer service standpoint, Apple wants to prevent backlog, give customers what they want, and sell a ton of machines. They can't accomplish any of these with the former configurations. The 450 MHz PowerPC G4 chip is the fastest chip Apple can buy, and it's not nearly as available as slower models. But Apple had the 450 MHz chip in its _mid-range_ model. That's a problem. Apple planned for a three-tiered strategy, with the most expensive and least-available processors in the most expensive systems. The price-based self-selection reserves those models for those who both need and can afford the power. Motorola's problems, however, put the actual high-end processor in the mid-range system. Apple was stuck for a high-end system and had to adjust the product plan accordingly. If 450 MHz machines are the fastest the company can build, it can't very well sell a $3,499 high-end machine and a $2,499 mid-range machine with the same processor speed. The differences may be worth the money to some, but the major _perceptual_ differentiator is megahertz. To keep the mid- range 450 MHz system at or near $2,499, Apple would have needed to introduce a 350 MHz machine for $1,299 or less. That would interfere with iMac purchases, horribly confuse entry-level purchasers, and shatter margins. It's no wonder Apple doesn't want to talk about this. MacWEEK.com notes analyst Lou Mazzucchelli working through similar thought processes. If Apple had reduced pricing on the systems, it would have stimulated demand as well. That, in turn, might maintain the same manufacturing backlog Apple very much wants to clear. MacWEEK's editorial asks rhetorically, "Does Apple expect _anyone_ to like these options?" It's the wrong question - the right question is "What better choices could Apple offer?" Lower prices mean lower margins. Analysts are obviously still very high on Apple's business plan, but a quarter of significantly lower margins could change that and create the perception that people are unwilling to pay the "premium" prices which Wall Street loves to associate with Apple. Apple CFO Fred Anderson might be able to manage that perception in three months, but it's a risk - and a risk to the bottom line as well. If Apple introduces Power Macintosh G4 systems in iMac price ranges, many people will want such an offering to stick around. That's not good for Apple. Neither do critics offer a reasonable alternative on the technical front. If Apple can't lower prices, should they have kept the existing configurations and let people wait? Hardly. The real problem is that Apple failed to manage expectations well. Apple seems to believe that nothing it could have said would make people feel better about the change so it let the announcement stand alone. MacWEEK's editorial didn't like that: "By vacillating about this relatively minor specification change, however, Apple is in real danger of alienating its core of professional users and losing the market momentum that the announcement of G4 systems provided the company in the first place." Apple's vacillation was less important than its lack of framing the change as a way to get the high-powered machines to customers faster at prices that match supply and demand. Everyone understands that rare products cost more. Apple could simply have said, "These prices not only compensate for exorbitant DRAM prices, but also provide nearly identical systems priced so that those who need the fastest systems can be assured of getting them reasonably quickly. As PowerPC G4 production problems are solved, we look forward to increased availability driving lower prices and even more outstanding price-performance ratios, though these systems are still the fastest available in the industry." In fact, Apple's announcement contains similar statements - the new configurations "match PowerPC G4 chip availability from Motorola," and are here "in response to Motorola's delays in reaching volume production of its 500 MHz G4 processor chip, which is now scheduled for availability early next year." But by linking the change just to the 500 MHz G4 chip, Apple missed the chance to frame the issue of supply and demand for _all_ the G4 systems, leading to customer outrage. No matter how you look at it, Apple has a losing hand - they announced G4 systems based on chips Motorola can't supply while DRAM prices skyrocketed. They have to both cover higher costs _and_ reduce demand, and that means effective price increases. Framing it as a 500 MHz issue, however, missed the point for the other configurations, which have customers the most annoyed. Apple was going to take a hit for this from professional customers no matter how it was announced. The hit just didn't have to be this big. [Matt Deatherage is the publisher of MWJ, the Weekly Journal for Serious Macintosh Users, and is busily preparing the reintroduction of the daily MDJ. Next week's issue of MWJ will include complete Mac OS 9 coverage: you can learn more about MWJ and check out a free three-issue trial subscription at the URL below.] $$ Non-profit, non-commercial publications may reprint articles if full credit is given. Others please contact us. We don't guarantee accuracy of articles. 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