Bushels of new iMacs piling up

Apple Computer, which initially couldn't meet demand for its new flat-panel iMac, now appears to have the opposite problem.

3 min read
Apple Computer, which initially could not meet demand for its new flat-panel iMac, now appears to have the opposite problem.

Retailers and distributors who had to wait weeks after the product's January introduction to get their hands on the desk lamp-shaped desktops now find the machines piling up as the consumer PC market slows to a crawl.

Distribution giant Ingram Micro shows more than 2,600 of the machines in stock, according to sources close to the company. With last week's orders from dealers amounting to less than 200 units, Ingram is sitting on more than 15 weeks' worth of inventory. That excess may be less severe at other stores and distributors, but it's clearly a troubling sign, analysts say.

"That level of inventory is definitely disconcerting," said ARS analyst Matt Sargent, who added that he had not personally seen the iMac inventory numbers.

Inventories of iMacs at Ingram exist across all models. According to a source close to the company, the distributor had more than 1,200 versions of the high-end iMac in stock as of last week. It sold 72 to dealers last week but on average has been selling 87 a week. Since the beginning of the quarter, the distributor has sold nearly 5,000 of the high-end models and 3,900 of the other two models combined.

Other PC makers in the consumer market are facing difficult times as well. April was one of the worst months for PCs in recent years, with sales down 22.5 percent for U.S. retailers, leaving the largest retail PC seller, Hewlett-Packard, with 10 weeks of inventory for Compaq Computer PCs and seven weeks for HP PCs, according to NPD Techworld. Normally, three weeks are considered ideal.

"HP has seen slower-than-anticipated sales...in the consumer market," HP President Michael Capellas said at an analysts meeting. But, he added, "we will adjust sales and drive inventory down."

Intel, Advanced Micro Devices and Apple have all warned this month that sales will be light this quarter.

Apple's problems, though, are slightly compounded. The company is heading into the traditionally slow summer season as well as the period before next month's Macworld Expo when Mac sales tend to drop as customers wait to see what new products the company announces.

Apple executives did not discuss iMac sales specifically on a conference call with analysts after the earnings warning last week. An Apple representative declined to comment for this story.

As for inventory, Chief Financial Officer Fred Anderson said at the time Apple issued its warning that the company was keeping a close eye on inventory and expected the overall supply in the hands of retailers and distributors to be about equal with the end of the prior quarter on a unit basis. Anderson said that the company had four-and-a-half weeks' worth of inventory at the end of the last quarter.

But while the number of units may be the same as Apple was going into the quarter, demand is not. Orders from Apple resellers started the quarter strong as stores looked to fill pent-up demand, but sales have chilled considerably in recent weeks.

At the CompUSA store in downtown San Francisco, for example, 58 of the machines sit piled up in stacks throughout the store's main floor, ready for a waiting buyer.

Since early this month, some analysts have been questioning whether sales of the new iMac were starting to flatten out.

The company is also trying to promote a fancy desktop at a time when notebooks are gaining in popularity. Even as the PC market is limping along, notebooks could see double-digit growth this year, according to some technology executives. Two years ago, many notebooks sold for close to $2,000 or more. Now it's easy to pick up a $1,399 model, the same price as the entry-level iMac.

"The (desktop) market is just really slow," Sargent said.

As a point of reference, Sargent noted that a recent Dell catalog devoted just two of 24 pages to desktop models, with notebooks accounting for the first 11 pages and 13 of the first 15 pages of the catalog. Ads for handhelds, printers and cameras also came before the desktops.

"It shows how notebook-centric the market is getting," Sargent said.