It seemed that Apples were back in season after the introduction of the revolutionary iMac in 1998. But the computer market is a competitive one, and recently it's become clear that Apple will need to fight hard against trends if it doesn't want to turn into "apple sauce" as the industry moves forward.
Plummeting
Last week the difficulty of Apple's battle was made obvious to market followers when its stock plummeted following the company's announcement that its fiscal fourth-quarter profits would fall far below analysts' forecasts. On Friday alone, the stock fell 52 percent, to close at $25.75.
"We've clearly hit a speed bump," Steve Jobs, Apple's chief executive officer said in a statement issued Thursday after the company's announcement, which followed the market's close. "Though this slowdown is disappointing, we have so many wonderful new products and programs in the pipeline -- including Mac OS X early next year -- and remain positive about our future."
Even though Jobs expressed confidence on Thursday, it is hard to imagine that the mindsets of the company's executives could be doing anything other than mirroring the price of Apple's shares.
Apple officials declined to comment for this article.
Richard Peterson, a market strategist for Thompson Financial Securities Data, jokingly told The Dartmouth Friday that "Steve Jobs is making sure he still has one."
"The question is where does he go from here," Peterson continued, suggesting that the company will have to evaluate its marketing strategy closely in the coming weeks and months.
"They have not been keeping up with the demand picture enough," Argus Research Group analyst Wendy Abramowitz said in an interview Monday, explaining the root of recent problems. She said Apple's traditional customer base has not been satisfied with the company's new products.
"The new ones are more expensive and offer less than Hewlett-Packard and Compaq have to offer," she said. "Apple has clearly been on the sidelines. There's a lot that needs to be done."
Abramowitz emphasized that in the short run the company should reduce product prices.
However, Dartmouth Director of Computing Services Larry Levine said he does not see product pricing as an impediment to Apple. He said buyers can purchase an iMac now for $799.
"That's pretty cheap," he said. "You can get a Windows machine for less, but I think people perceive a greater value in Mac."
For many, the subject of Apple's performance is a touchy matter, as the company has traditionally had a very loyal customer base. This is especially true at Dartmouth -- an historically Apple-centric campus.
But as Levine pointed out, "The Apple loyalists are aging. There's a greater number of younger people purchasing computers who don't have that emotional attachment to Apple."
Finding a niche
Apple was really the first company to enter the personal computer market when the company -- co-founded by Steve Jobs and Stephen Wozniak -- introduced the Apple II in 1977.
IBM did not enter the burgeoning computer market until 1981, when it created the IBM Personal Computer (also known as the IBM PC).
Apple created its first Macintosh computer, a wildly successful model, in 1984. In 1985, the Microsoft Corporation created Microsoft Windows, which gave MS-DOS-based computers many of the same capabilities of the Macintosh, which could lay out text and graphics on the display screen as they would appear on a printed page.
Since the mid-1980s, Macs have had more of an educational market than PCs, while PCs have had a strong hold on the more technical market.
But that market has dwindled lately. In Thursday afternoon's earnings warning, Apple attributed its low sales for the quarter primarily to lagging educational sales. Usually, purchases by schools and students make up about 25 percent of the company's sales, according to analysts.
Especially with the newest addition to Apple's starburst-colored line, the Cube -- which can fit easily onto a desk -- the student market seemed in the bag.
However, sales on the Cube -- which retails for $1,799 -- fell short of company expectations. Also, Apple has released many new products within an unusually short time span. Even loyal Mac-buyers cannot necessarily afford to purchase each update to the candy-colored line -- from the Cube, to the iBook, to the G4 Tower, to new versions of the iMac.
A case study
As one of the higher education institutions that has been most loyal to the company, Dartmouth's slow transition from the use of Apples to Windows machines on campus could be a sign of a greater trend -- but it is not clear if that is the case.
Dartmouth's Computer Science Chair David Nicol said his department does not use Macs very often, except in introductory courses.
"These days, it has less to do with the particular operating system so much as it is the software that is available on it," he said, explaining that upper level courses usually use Unix, a system that does not work on Macs.
But he admitted that "Macs are good at what they do," explaining that the Mac operating system is easier to learn for many users.
Nicol said his department's decision not to purchase more Macs this year did not necessarily have to do with any greater trend in the computer-purchasing world. The department had bought some Macs the year before and simply did not need any new ones.
Levine said that after Dartmouth stopped urging incoming students to purchase Macs, the number of students who have chosen purchase PCs has risen and the number of Mac-buyers has fallen.
"We saw 60 percent purchase Windows, and that's just consistent with how the world continues to go," Levine said. "Whether or not you can attribute that to what Apple's done in the marketplace, I'm not sure."
While he could not generalize about why Apple has not been able to send as many computers as it had anticipated to schools, Levine said at Dartmouth, students have much more experience with computers than they did when the College first recommended that students purchase a personal computer in 1984.
"They've probably used a variety of PCs and been much more engaged in the PC world," he said. "That's basically a Windows world."
Looking forward
As the company looks forward, it has a lot of work to do.
Peterson of Thomson Financial Securities Data said he thinks the stock's rapid fall would not continue for long. The stock lost another $1.50 on Monday, but that didn't seem like much after it got slammed on Friday.
But he said it was important to regain momentum.
Abramowitz of Argus Research Group said she thinks the stock is currently undervalued after being hit so hard by Thursday afternoon's announcement.
However, she doesn't think the company will rebound on its own: "They still have a lot to do to get back on course."
With Apple's past performance in mind, its recovery is not at all out of the question. However, to recoup the strong gains it showed over the past two years, it will have to reevaluate its game plan and consider whether it is on the right track.
