Will iMac drain resources?

As Apple Computer sets it sights on the iMac, there is concern that it may be less focused than it should be on powerful notebooks and desktops that some of its most exacting customers need.

Few doubt that the iMac is going to give a boost to Apple's market share and even its bottom line this year. To make this happen, the company says it will spend more than $100 million on an advertising campaign, and its plants around the world are humming night and day to produce systems.

But the company will have to perform a delicate balancing act to get its other products to market in timely fashion. Sources close to Apple mildly say employees are being moved from various production lines to work on iMacs, with the inevitable result being lower numbers of other systems being built.

That could be particularly problematic to production channels for the popular PowerBook portable and high-end desktop G3 systems. The PowerBook G3 notebooks were introduced in May but largely overshadowed by the iMac fanfare, and some of the more expensive models have been available only in limited quantities.

The company has to produce more iMacs to make the same amount of money it could generate by selling fewer of the more expensive G3 desktop and notebook systems. If iMac sales taper off too quickly and there is simultaneously a lack of high-end products, revenues could be negatively impacted.

Apple's PowerBook G3 system with 292-MHz PowerPC 750 and 14.1-inch screen

Employees are working around the clock to produce iMacs at Apple's Elk Grove, California, plant.

has been hard to come by ever since introduction. The lack of the high-end units is having a ripple effect on availability of the mid-range 250-MHz PowerBook, as well. Six resellers representing a mix of retail storefronts, catalog operations, and VARs (value-added resellers) all noted an acute shortage of the top two notebook configurations.

Anecdotal evidence suggests that the desktop systems are being affected as well. Yesterday, Apple dealers started advertising a new G3 system with 366-MHz PowerPC processor. However, one reseller that spoke to CNET News.com said Apple unexpectedly decided not announce the system because of concerns about system availability--even as some dealers were taking orders for the computer. The system, along with the 333-MHz system, will reportedly not be widely available until mid-September.

Mitch Manditch, senior vice president of worldwide sales at Apple, said the shortage was not the result of increased iMac production, noting that the products are made on different production lines and that they are not impacting each other.

Whatever the case, the high end of the Power Macintosh line is suffering too, according to some users. Current systems have three internal slots for accepting add-in circuit boards, which is all the slots that most of its customers need. However, a good portion of its professional customers in the desktop publishing and video editing markets are either running out of these slots or can't get items such as high-end graphics accelerator boards to fit in current systems.

Apple was working on designs with six expansion slots last year, but the project got canceled in favor of the G3 systems that had the widest appeal and cost less to manufacture.

Industry sources indicate that Apple is again working on a six slot system and other designs that would include AGP (accelerated graphics port) 3D graphics technology but that currently the company's engineering resources are focused on products that will ship to the largest audience.

"It's an issue that's been going on forever. A six-slot system won't help with Wall Street [analysts]," said one sympathetic source. "Apple's got to have volume sales. It's understandable. It will help the company make enough money so it can come back later and give us what we need."

But even with the resources being devoted to the flashy new iMac, there are some remaining questions about how many systems will be available and how long customers might have to wait to receive their order. Interim CEO Steve Jobs seemed to indicate in a New York Times article in July that Apple couldn't meet demand.

"We're going to make a lot of iMacs this quarter, [but] even making a lot, there's no way we will meet demand this quarter," Jobs told the Times. "We hope to meet demand next quarter. That's just the way it is when you have a hot product."  

Go to: Banking on the iMac