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Macintosh demand to eat supply

With price cuts looming, vendors are concerned that they might run out of inventory before new products are available.

With Apple Computer expected to cut prices on its Power Macintosh G3 systems early next month, vendors are concerned that they might run out of inventory before a new line of Power Macs is available to replace them.

Both Apple and its distributors, Ingram Micro and Pinacor, now have no back stock of either current or discontinued G3 systems, according to sources at several resellers who say they can't get any more systems beyond their current allotment.

Questions have also been raised Apple's ability to produce enough of the new iMac computer, due August 15, though

Power Mac G3 pricing
Model Current Expected
233-MHz desktop $1,699 $1,399
266-MHz desktop $1,999 $1,699
266-MHz minitower $2,499 $1,999
Source: Anonymous resellers
most industry observers believe the company is prepared for a large number of orders.

In other words, some resellers could run out of G3 inventory (not including G3 portables or the iMac) before Apple refreshes its product lineup, an event that is expected to occur in early September.

"We think demand could slightly exceed supply. That's not necessarily a bad thing as long as Apple does its part" and comes out with some new systems on time, said one reseller, who asked to remain anonymous.

Of the three Power Macintosh G3 models that are still in production, the entry-level G3 with 233-MHz PowerPC 750 processor as well as the 266-MHz desktop system are expected to receive price cuts of $300, sources said.

In early July, Apple stopped production on several other high-performance models, including the 300-MHz systems introduced in March. Those systems remaining in dealer inventory will see dramatic price drops as Apple prepares to fill out the high end of its lineup with new computers using still faster chips from IBM and Motorola.

For example, a G3 with 300-MHz PowerPC 750, 128MB of memory, dual 4GB hard disk drives, and a CD-ROM is expected to be reduced to $3,474 from $4,599, a reduction of approximately $1,100. A 300-MHz system with one drive and 64MB of memory is expected to have its price cut by $975, with resellers expected to offer systems priced at $2,390 and lower.

"I expect to run out of a lot of product. There could be a period where there is not a single [G3] Mac available," another source said. If that were to happen on a widespread basis, Apple could lose a good deal of sales revenue.

One reseller surmised that running short of systems is better for Apple's profitability than having too many systems. That's because Apple would have to offer dealers money back on old systems sitting in inventory, and lower prices on the old systems can put a dent in sales of newer systems.

Dealers who spoke to CNET NEWS.COM are also pleased that Apple doesn't have to slash prices all the time now, because that causes customers to return to ask for money back.

"Apple is right on by flushing out the old and making room for the new," lauded another reseller.

The tight rein on inventory is a far cry from what observers call "the old Apple." One industry source said the company's one profitable quarter under former CEO Gilbert Amelio was "smoke and mirrors" achieved by shipping lots of computers to resellers, who then shipped unsold systems back to Apple.

Running out of systems during a product transition is not all that unusual within the PC industry. In May, many retailers selling Compaq Computer's Presario systems ran out of inventory as the company ramped up production of new systems for June, temporarily knocking the PC giant out of the No. 1 spot in retail sales.