Apple of my eye

Apple doesn't have the biggest slice of the pie, but its share of users certainly is dedicated. In fact, die-hard Mac users would rather quit work than use PCs. So where does its online strategy fit in?

Apple used last month's Apple Expo to announce two celebrity usersusers certainly is dedicated. In fact, die-hard Mac users would rather quit work than use PCs. So where does its online strategy fit in? this year: shock-happy artist Damien Hirst and Pulp frontman Jarvis Cocker, who rather bizarrely espouses the benefits of using the Newton MessagePad.

It certainly is a coup to attract the rich and famous, but before Apple gets too high a celebrity endorsement, it ought to remember the particular skills of its fans. Cocker is known for dressing as if he lived in the 1970s and Hirst, described as 'surprisingly shy' by a visitor to the show, is famous for celebrating dead animals. So is the Apple brand pickled in formaldehyde? Are its supporters living in the past or are the reforms instituted by acting Apple CEO Steve Jobs beginning to make a difference?

While the Apple UK channel is far from complacent - who could be after this year - few had seen a significant amount of dissatisfaction from long-standing customers. Apple has to do little to hold on to them, says a channel source, especially now that it has squashed the clone business that was beginning to break down brand loyalty. Instead, it must develop additional customers with Mac OS 8 and the G3 range of PowerPC Macs. 'We are committed to Apple,' says Chris McAuley, MD of Chase Technology, whose Last Word operation specialises in desktop publishing - still an Apple-dominated market. 'Everyone has written about Apple's troubles, but we have a base of customers who would rather leave their jobs than have to use a PC. They seem to love their equipment.'

The same message comes from Maneesh Patel, executive director of reseller Mygate Computers. 'Customers look at what Apple is doing and realise it's better than it used to be. Apple is loyal, which is why dealers like us are loyal. In the past, the product has kept selling, despite what Apple has been doing. For the customer, Apple's saga just goes on in the background.'

While Mygate has managed to protect its Apple sales, many resellers haven't.

Research firm Context picks Apple and Olivetti as the two big losers in its analysis of Q3 - ended 30 September - personal computer sales in Europe. And with the companies above it in market share like Dell, Hewlett Packard, Compaq, Siemens Nixdorf and Toshiba continuing to improve, Apple can't afford to tread water in the European market. Apple needs a stronger European channel management.

While the manufacturer has made it easier for resellers to buy direct from Apple US - cutting the thres-hold for direct dealers to $2 million annual sales from 15 December - previously, the lower limit was $20 million - it is trimming its UK distributor base from three to two, while trying to push even more business through the distribution channel.

'Currently, distributors have a lot to offer,' explains Patel. 'They have to follow the US strategy of cutting back on distribution, but it's half a strategy in the UK. It doesn't quite make sense.' He adds that the move to internet sales was also a concern - but less so. 'I don't think the direct sales impact is going to be an issue, and we are happy with the new range of Macs. The G3 is absolutely superb. This range is the best we have ever seen.'

Patel warns against getting too upset about the impact of internet sales on the channel. The last time Apple tried something similar, he says, it was with the Apple Direct CD-Rom, which flopped. 'We've coped with Apple's management up until now. It's within Apple tradition to have excellent products and terrible managers. In six months, internet sales could be canned, so we take all these decisions with a pinch of salt.'

If internet sales do take off, Patel will be expecting to tap into Apple's resources so it can develop its own online shopping site. 'I'll get Apple to help. And I'll sell third-party products,' he says. 'People may want a G3, but they don't want an Apple monitor or printer.'

Adrian Morris, a consultant at AppleCentre Cambridge, is pleased with Apple's new hardware range, but is still confused about the marketing strategy - especially over which customer Apple will target with its Net sales next year. 'Apple can't target new users or small users because they either don't have a computer or don't buy a new one often enough, so Apple may go after the publishing market. We'd be concerned about that.

'Selling over the internet is effective in certain areas, but when Apple closed Apple Direct it reserved the right to start selling from a catalogue again. I feel that in the UK Apple will do that.'

Morris' acceptance of G3's pricing is marred by the realisation that DTP customers are now paying #1,700 for a fully-configured machine.

It's a fact of life that with better price-performance comes the curse of lower margins, especially at the low end.

Now, Morris says, the latest Performas are biting into the bottom of the business market. 'Business people now call up asking for a Performa instead of a PowerMac. But the new range has given us hope.'

Meanwhile, Morris is waiting for more guidance about how the US changes will be reflected in Europe. 'There's little information out there,' he says, 'but that's probably because Apple itself doesn't know the answers.'

While the time when Apple resellers would march on headquarters at the hint of a direct sales policy has passed, they haven't lost their spunk and will certainly give Apple a run for its money.

Apparently, former Apple chief executive Michael Spindler was prone to panic attacks and was occasionally found hiding under his desk, but Jobs has much thicker skin.

Whoever the Apple board picks as the next long-term chief executive will almost certainly feel like assuming the Spindler position in the near future.

Clone zone

What happened to the Apple clone market? Now that Apple has attempted to buy its biggest cloner, Power Computing, and decided not to license the next version of its OS to cloners, the clone market is effectively dead - or it soon will be.

In 1996, 300,000 clones were sold. It wasn't a huge figure, but Dataquest predicted that cloners would take a quarter of the Apple sector. With those cloners taking share from Apple rather than Wintel, redirecting those sales to Apple could make a significant dent in its losses.

Apparently, Jobs made a similar connection. Under the terms of its licence from Apple, even if Power Computing survives into 1998, it must stop selling clones at the end of the year. It has already stopped manufacturing them.

With Jobs' encouragement, Motorola has withdrawn from a market that it never really attacked - the promised Motorola communications products using its mobile communications expertise were never sighted. That leaves Umax, which has vowed to continue selling Mac clones, albeit as a reduced part of its business.

In the fourth quarter of 1997, Umax started to manufacture network computers, while announcing a year-on-year sales jump of 118 per cent. But with Apple refusing to license Mac OS 8 to cloners, Umax will never be able to match Apple for price performance.

When Apple bought Power Computing in September, Dataquest analyst Chris LeTocq characterised the clonemaker's position: 'Apple believed it was a market-expanding proposition.

Now it believes it is a market-threatening position.' At Mygate, Patel agrees: 'Cloning never grew the market, the cloners just ate Apple's share. When the clones launched we just saw a bunch of me-too products. That was very disappointing for us.'

When the deal with Power Computing goes through, there may not be much left to buy. Last week Power Computing announced it had suspended its sales of Windows notebooks.

'We are trying to find a more efficient way of doing business,' says director of product marketing Bill Goins at Power Computing. It may be lucky to find any way at all to do business.

By stopping sales of PCs at exactly the time it stops sales of its Mac clones, this leaves Power Computing without any way to generate the $250 million revenue it predicted for 1997/98. 'We look forward to welcoming its customers back into the Apple factory,' says Jobs. In truth, they have nowhere to go.

Shoppers' mart

Apple isn't used to trumpeting sales success stories, so when it opened its internet store (www.store.apple.com) on 10 November, it could hardly believe its luck - it made $500,000 of sales in the first 12 hours.

If Apple needed encouragement to end its channel-only policy in Europe as well as the US, this was surely it. Apple Store received one million hits in its first half hour of business - and 4.4 million in its first 12 hours. Half of its sales were for the Apple G3 range.

A visit to the US-only site sees a slick, well-organised internet sales operation. In contrast to the interminable waits that Mac users are accustomed to, Apple promises to ship products inside one working day, or two weeks for build-to-order machines.

Security is provided using secure sockets layer (SSL) encryption, and there's even a free Apple QuickTake digital camera offered for all orders placed.

Apple Store has achieved another first - it has found a use for NeXT Software, acquired by Apple in January. The store uses NeXT's WebObjects technology, which Apple claims enables it to update the product lines and prices quickly. An example is the special offer page, which gives details of Apple's refurbs and bin-ends.

UK users won't have to wait long to see how direct sales of Apple equipment over the internet take off in Europe, as the European version of the store has been promised for next spring.