Apple's New Core

If the new iMac functions as well as it's supposed to, it will simplify your digital life like no other machine can. You can buy a PC with a flat-panel display and a built-in DVD burner for around $1,800, the same as the equivalent iMac. But it won't work as well. In part, that's because Apple gives away a number of core programs (iTunes, iMovie, iDVD and, starting this week, iPhoto) that allow you to control your creative life. They do what other PC software does. But they do it better.

Apple's secret, which doubtless comes from Jobs' early flirtation with Zen Buddhism, is knowing what to leave out, understanding that in the complex world of computers, less is way more.

For instance, iPhoto, a program for handling those digital pictures, is superior to anything else out there for the amateur. How? When you connect your camera to the iMac, archiving pictures happens automatically—the pictures are uploaded and organized by "roll" and archived together as thumbnail images laid out on one endlessly scrolling digital contact sheet. A slider on the side of the contact sheet lets you instantly enlarge and examine hundreds of pictures at a glance, the better to find the one you're hunting for. This works far better than the PC alternative, which would have you manually labeling each picture you archive ("Joe at the Beach") or accepting a meaningless default name, like A2393745. (Best feature of the new program: point-and-click together a 10-page photo album of your favorite pics, pay $30 and an online publisher will print and mail you your own hardcover book.)

Manipulating video—distilling those 90-min. tapes of mind-numbing music recitals and awards banquets into amusing, fast-moving 3-min. shorts—is almost as simple on the new iMac, which features a fast G4 chip, just like Apple's top-of-the-line machines. When you're done creating your masterpiece (with iMovie), you can copy it onto a DVD (with iDVD, of course). A DVD burner is squeezed into the high-end $1,800 model. While it's hard to come up with a perfect Apple-to-PC comparison, a top-of-the-line Dell Dimension 8200, with a flat-panel monitor and DVD burner (plus a faster Pentium 4 processor and much larger hard drive), costs $2,200 and will occupy much of your desktop and part of the floor.

But if PCs are clunkier than Macs, they have the great virtue of being ubiquitous. While Jobs' Apple may indeed make the most innovative, easy and fun-to-use computers, most consumers want what everyone else uses—big, cheap PCs that run Windows. A case in point: the ice-cool-looking Cube, introduced in July 2000, was a disaster for Apple, partly because no one, not even the Mac faithful, wanted to spend $1,799 on it (monitor not included), no matter how gorgeous and cutting-edge it was. That was probably a pricing mistake as much as anything else—Apple's gross profit margins (the difference between what it costs to make and market a thing vs. how much you charge) have been huge under Jobs. This time, however, with the new iMac, Apple is really keeping the costs down—something it can do because it controls much more of what goes in the box than the typical PC competitor, which buys virtually all its components from third-party sellers.

Still, at $1,299 for the entry-level iMac, the product could be priced too dearly to attract many converts from the PC world. "It's unlikely that any specific product announcement by Apple will have any immediate impact on the company's position in the market," says Al Gillen, an analyst who tracks Apple for IDC. While he hadn't yet seen the new iMac, in Gillen's view, the battle over the desktop standard was won long ago by the Windows-Intel forces.

And Apple's operating systems aren't helping. In fact, they are steadily losing market share, he says, pointing to recent data that suggest Apple OS's accounted for only 3.6% of new license revenue in 2000. Worse, IDC projects that they will amount to even less in 2001. By contrast, Microsoft's share of Windows licenses has increased during the same period.

Forget innovation, some analysts tell Apple. The most important thing Jobs can do is embrace the Dark Side and find other bridges to the Windows-Intel world. Says Gillen: "It's no longer a matter of which product is better but rather which world do you need to work in." That is, if you use Windows at work, you will use it at home. Instead of packaging cool, creative applications in each iMac, critics say, Apple should give people a Windows emulator so they can run PC programs if needed.

Yet the Internet, which was engineered so that every kind of computer could connect, has gone a long way toward making Apple computers compatible with everyone else's. And while it's true that most computer programs come out for Windows machines first and Macs second (if at all), that's not so important as it once was. All bread-and-butter programs, such as Microsoft Office, are available for the Mac. And in the entertainment category, the trend is to do one's video gaming on dedicated consoles like the GameCube, Xbox and PlayStation2, not on the computer.

Indeed, Carl Howe of Forrester Research believes the Internet has helped Apple make headway in the platform wars. "I think Apple doubling its market share is entirely possible," he says, citing a Forrester report that shows Apple had the highest satisfaction and buying index among large companies in North America. The premium they paid to own an Apple (one that is now shrinking) didn't seem to matter much. "Price is the last refuge of the marketer. It's what you sell when you don't have anything else to differentiate you," says Howe. "If prices were all that we cared about, we'd all be driving Hyundais." As Jobs likes to point out, BMW and Mercedes-Benz occupy a similar niche in the automobile market, but no one dismisses them as niche players.

"Every time we've brought innovation into the marketplace, our customers have responded—strongly," Jobs says, claiming that it might not be so hard as it sounds. "We only have to attract 5 out of the other 95 people who use PCs to switch, and Apple doubles its market share." That, of course, would buy the company that much more breathing room.

The original iMac did bring converts into the Apple tent. Besides, if all goes according to plan, merely by surviving Apple could grow into other areas. Jobs believes the shake-out in the computer industry will result in Apple's being one of four computer makers left standing. The other three? Compaq and/or Hewlett Packard, Dell and Sony. The rival he's pursuing most aggressively is Sony, which not only makes stylish computers ("They copy us like crazy!") but also makes plenty of digital lifestyle products. "I would rather compete with Sony than compete in another product category with Microsoft," he says. That's because Sony has to rely on other companies to make its software. "We're the only company that owns the whole widget—the hardware, the software and the operating system," he says. "We can take full responsibility for the user experience. We can do things that the other guy can't do."

One example is the iPod, Apple's stylish music player and its most recent foray into the consumer-electronics business. Jobs says Apple is on track to break analysts' best estimates and sell $50 million worth in the last quarter of 2001 alone. The cigarette-pack-size MP3 player is so popular that people have been coming into Apple stores to buy their first Macs, just to use the iPod, he says. (The company launched its own retail stores last year—Jobs redesigned the floor plan at the last minute, of course.)

Are other noncomputer appliances on the horizon? "We have some ideas," says Jobs, adding that Apple would enter the marketplace "where we think we can make a contribution." For instance? Jobs sits back, smiles and declines to elaborate. Clearly, he's already working on something new. You can bet it's the best thing that Apple has ever done.