Transatlantic Cable: Apple has problems - so what's new?

Apple's problem is simple: it hasn't sold enough Macs. Despite the runaway success of the iMac (available in whatever colour you want, as long as it's not black), sales of Macs have been falling, culminating in the first loss for Apple since 1997.

In the first quarter of fiscal 2001 the company reported a loss of $195m. In particular, sales of the new G4 cube have been poor, and unsold Macs of all types have been piling up in warehouses. At one point, Apple had around 13 weeks worth of inventory - far more than is healthy. The company claims to have fixed this problem (with around five weeks worth of Macs to hand, which is about average), and hopes to be back on track with a profit in the next quarter.

Notoriously bullish Apple CEO Steve Jobs chose his words well when he described the last few months as "particularly challenging". Challenged is definitely the right word for Apple stock, which has taken a hammering. At the time of writing, it is worth just over $16, well down from its high last year of over $75.

All of this comes just a few days after the MacWorld show and the traditional Steve Jobs keynote. And this year was the same as ever: a slew of announcements and new products accompanied by much hooting and hollering from Mac devotees. The highlights of this keynote included the long awaited (and long overdue) announcement of faster Macs, with processors now running at 733MHz, the launch of new MP3 software called iTunes and finally setting a March release date for the next version of the Mac operating system, MacOS X.

But the two loudest rounds of applause were reserved for the launch of a new Mac PowerBook and DVD authoring software called iDVD. While the new PowerBook is extremely impressive, the iDVD program deserves a closer look due to a rather glaring catch.

The idea is that you get your video files (taken from your digital camcorder using the built-in Firewire port of your Mac), organise them and then create a menu. You then hit a button, and the program automatically encodes the video and burns a DVD (that can be played on most DVD players) using the DVD-R drive. It sounds easy, and Apple is pitching it at people who want to create family videos. All well and good but for the fact that the DVD-R drive is only featured in one model: the Ultimate G4, which weighs in at a hefty £2,499 (excluding VAT) - far more than most families would expect to pay for a computer. You can't even add it to one of the cheaper models as an option: it only comes with the one expensive system.

So 2001 already looks like being an interesting - if mixed - year for Apple, and I'll stick my neck out and make a couple of predictions. First, we'll see Apple stores in the US (and probably the UK) by the end of the year. Jobs met with vendors at the show, and didn't deny that Apple is planning to open its own stores. When asked how he felt about competing with the vendors Apple has been working with, he apparently replied, "This is America", which pretty much means "... and we'll do what we like, and if you don't like it, you can go forth and move to Iraq".

Second, we'll see Apple going into 2002 with Jobs still in control. The company isn't in a great place right now and Apple is a company that people love to kick when it's down. There has been a slew of stories recently about how it could be bought out, how Steve Jobs could be deposed or how President Bush could sell out the US to Microsoft. However, none of these are likely to happen, and although there will be problems Apple will continue to be a strong force in the computer industry.