Will iMac's rollout be enough?

With the anticipation surrounding its biggest and most challenging product launch in recent memory comes the danger of Apple's failing to deliver.

4 min read
Apple Computer has switched the hype machine into full gear to generate consumer demand for the iMac, but with the anticipation surrounding its biggest and most challenging product launch in recent memory comes the danger that the company could alienate customers if it doesn't deliver all the systems that people want on time.

The company is hoping to sell as many as 1 million units in just over four months, according to reports that quoted an Apple official. Sources close to the company are projecting U.S. sales of 400,000 by December.

That compares to unit sales of 750,000 PowerMac G3 systems in the seven months since that product's launch in November of 1997. An Apple spokesperson declined to confirm any sales projections of the iMac.

Apple has already started to ramp up production after a few glitches pushed the introduction date from August 1 to August 15, according to one industry source, with plans to have some 250,000 units ready for sale worldwide by the iMac's official launch date.

All of the iMacs that attendees are trying out this week at the Macworld Expo in New York are "pre-production" units, not commercial products. Some have rolled off the production line as recently as the beginning of July, according to dates stamped on the inside of the machines.

Analysts are cautiously optimistic about Apple's being able to meet demand, but warn that any slip ups in the manufacturing process could stall Apple's comeback.

"Right now, the computer industry [is like a] marathon. We're near the end of the race, and if you stumble, you can't recover," said Roger Kay, an analyst with IDC Research.

Demand is likely to be very high, according to resellers who spoke to CNET NEWS.COM.

"Based on the amount of dollars Apple is allocating to advertising the iMac, they expect a good number of sales," both before and after the launch, said Tony Violanti, vice president of Computer Town, a large computer reseller with stores in Arizona, Massachusetts, and New Hampshire.

Violanti says "hundreds" of systems have already been ordered, and that number should climb into the thousands as the product launch nears. Other resellers report similar numbers of early orders.

Mike McNeil, president of Pacific Business Systems, which runs the Club Mac catalog operation, says the iMac will give his company a boost in both new system sales and associated software.

In the past, Apple has made grievous errors in manufacturing--which resulted in the recall of PowerBooks and some consumer systems in 1996--and historically has built fewer machines than demanded at the time of product launch, Kay said. The good news, Kay says, is that Apple is in control of a lot of variables because most of the system components are being assembled in Apple's own plants.

"I have confidence they can meet their build plan," Kay added.

Apple used to fall into self-inflicted production snares by designing systems that required custom parts, said Mitch Manditch, vice president of worldwide sales for Apple. If the parts weren't needed, Apple was stuck with them. What's worse, if there was a production problem with any one component, manufacturing ground to a halt. Such problems seem to have eased because the company is now designing systems with fewer specialized components.

"We are driving...industry standards such as USB [universal serial bus] in the iMac and all future products, memory technology, and disk technology," Manditch said. Not only does that help product availability, but it helps drive down system cost, too.

"We really are taking advantage of dropping price curves. We don't have the same volumes as a Compaq, but [component] pricing is within a thin margin. You can see it in value of iMac. That's a $950 product without the monitor and speakers," he noted.

Apple also suffered severe manufacturing and demand forecasting problems with the PowerMac in 1995. Shortages in both Apple-only and industry standard parts, combined with poor demand forecasting, resulted in a backlog of high-end PowerMacs and surplus of consumer computers. The backlog eventually topped $1 billion dollars. At the same time, Apple had excess inventory on other computers.

The imbalance led to lost sales, according to Apple executives at the time, and quarterly financial losses. Ultimately, the losses caused by the imbalances contributed to the resignation of then-CEO Michael Spindler in February 1996.

Computer Town's Violanti thinks Apple's past production problems have been licked. "They are building products that have very few problems. They have been delivering systems on time," he said.