Apple partner falls from the tree

Wichita, Kan.-based Newer Technology closed its doors last week with little fanfare after letting most of its staff go.

The 16-year-old company, which previously filed for bankruptcy protection in 1996, is best known for selling Mac add-on products, such as G3 and G4 processor upgrades, the BookEndz docking station for PowerBook portables, and IEEE 1394--or FireWire--PC Cards.

Analysts say Newer's demise reflects a slump in sales of Apple computers and the company's lack of product diversification. It also casts a shadow across competitors Sonnet Technologies and PowerLogix, as well as other makers of add-on products for Macs. Compared with PC manufacturers, Apple relies more heavily on other companies to produce upgrade products.

Apple's relationship with its third-party partners has been tested time and again. When Apple switched iMac colors in July, the move caught many peripheral partners by surprise. At the time, some manufacturers griped about Apple's apparent disregard for them when unveiling new products.

And now Apple's recent sales woes are hitting Mac manufacturers hard. According to ARS, a whopping 11.5 weeks worth of Apple inventory sits on dealers' shelves.

In response to slow sales and in preparation for new models expected at next week's Macworld Expo, Apple on Monday slashed PowerMac G4 prices by as much as one-third.

"If you look at the price cuts, the systems that have taken the brunt of them are the business systems," Gartner analyst Chris LeTocq said. "Typically the third-party guys supply the business market, rather than consumer."

The beginning of the end?
Newer could be the first in a long line of third-party Mac manufacturers stung by Apple's inventory glut and slowing sales, LeTocq warned.

"Apple has had trouble in the business market," he said. "When Apple sneezes, these guys catch a cold."

No one at Newer could be reached for comment. The company's offices are closed. The Web site remains operational, but the company is not selling products or offering technical support.

"The employees of Newer Technology would like to thank the Macintosh community for 16 great years of support," states a recorded message on Newer's phone system. "Unfortunately, our offices are closed and will remain so pending the outcome of a shareholders' meeting on Jan. 8. There is no sales or technical support available at this time."

The meeting is expected to finalize Newer's second bankruptcy filing in recent years.

Although Newer apparently had its own share of problems, analysts say Apple's poor sales haven't helped.

"When Apple has a major glitch like it just had and you're a third-party vendor treading on pretty thin ice, it's going to be a problem for you," LeTocq said.

How other Mac manufacturers will weather Apple's sales crisis is uncertain, analysts acknowledge. The Mac processor-upgrade market, Newer's specialty, has been on a decline anyway. PC Data analyst Stephen Baker described the market as "not good, basically."

In November, retail sales of Mac processor upgrades declined 34 percent as measured in units and 40.5 percent in dollars from the same period last year, according to PC Data. For January through November, the market declined 21 percent in units and 40 percent in dollars year over year.

Newer also trailed, by a large margin, the market leader in Mac processor upgrades. For January through November, Sonnet had 63.7 percent market share, compared with Newer's 29.7 percent. PowerLogix followed with a 2.6 percent share.

But not everyone thinks the Mac processor market is in decline. In a statement released Friday, PowerLogix said sales in 2000 were up 50 percent over the previous year and projected a 400 percent increase for 2001. Still, on Tuesday, PowerLogix cut prices on many of its products.

In the end, those companies most committed to the Mac pay a high price when Apple is hurting.

One of Newer's problems was its failure to diversify beyond Macs into Windows, Baker asserted. "These companies need to branch out more."

LeTocq concurred.

"If your business is that your dog is being wagged by the Apple tail, as it were," LeTocq said, "you have to be very aware what's happening with Apple and be very prepared to adjust your business model."