The Bloor Perspective: The new iMac, web services and vendor wealth

At the recent Macworld event the main focus was on the new iMac. The rumour mill has been working overtime since Time magazine leaked the story and the fact that the new iMac looks like some sort of space age angle poise lamp was no surprise. The 15-inch LCD flat screen attaches to the dome-shaped system unit by an arm mechanism. Inside there is a 700MHz or 800MHz processor combined with disk, memory and CD/DVD options and included in the top of the range model is Apple's SuperDrive.

The new iMacs consolidate Apple's digital lifestyle concept by including the iTunes and iMovie software together with the new kid on the block, iPhoto, which provides everything the user needs for managing digital cameras images.

So again, Apple comes up with a classic piece of kit. In the new digital world of music, cameras and video Apple integrates and makes its products easier to use than its Wintel counterparts.

It's easy to see why Apple has such a fanatical following - Steve Jobs and his company epitomise the excitement and innovation that was common in computing in the early 80s, but has since been lost by so many.

But there is a price to pay. While the company can ride out any recession with $4bn in the bank, annual revenues have dropped from $8bn to under $6bn and while anyone who has ever used an Apple machine is unlikely to go back to anything 'inferior', the sales of new machines account for less than 5 per cent of the US PC market and 3 per cent worldwide.

The question is - where is the market for Apple? With the company's apparent US-centric stance it is missing out on a market that every Wintel vendor has been keen to exploit. As far as the home market is concerned, everyone that is going to buy a PC has probably bought one.

The majority of home users - unlike corporates - do not follow a 3 to 5 year upgrade programme. Even if they did, they probably use Wintel at work and are unlikely to change platforms unless there is a compelling reason. Unfortunately the 'I' software is unlikely to be enough unless you're a geek or gadget lover.

No doubt the loyal Apple fans will fall in love with the new iMac at first sight, but whether or not it will do the same for the company's fortunes as the original iMac did has yet to be seen.

Are web services the future of IT?

Web services are the next big buzzword for tech firms. The idea is simple enough too - the internet is used to publish and deliver modular applications or web services and any company can subscribe or use as many or as few web services as it needs.

Simple in theory but in practice not quite the same story. In order for web services to work effectively they must be able to communicate seamlessly with one another regardless of the language they have been written in or the platform they are running on. This requires standards and while the IT industry is full of standards they're not exactly it's strong point.

One of the main marketing arguments for web services is that, traditionally, much time is spent developing integration solutions between systems. The introduction of web services reduces the time taken to develop new applications and hence increases the productivity of developers.

While this may be true, no consideration is given to the training that is needed for developers to gain the new skills that are needed for them to adopt a modular development approach. Add into this the change in thinking to the design of systems so that web services can be adopted and it is clear to see that it will take some time for organisations to get up to speed.

What we're seeing so far is the traditional hype. There are a few cases of companies starting to use web services but it's not going to happen in earnest for some time. It is an interesting enough idea and appears on the surface to offer interesting benefits. But of course the proof of the pudding is in the eating and so until that happens - don't believe the hype!

They're still lining their back pockets&

As last year saw, profits plunge for the high tech sector, often accompanied by massive redundancies. Some of the more established vendors continued to line their back pockets - for rainy days.

It appears that many of the blue chip vendors chose not to pay dividends - a practice common among almost every other market sector. This is backed up by research that shows less than 10 per cent of the biggest US-based technology companies pay any dividends.

Microsoft is involved is what appears to be sharp practice by some of the world's leading businesses. The Redmond software giant reported cash and short-term investments of $36bn in its last set of accounts. The figures for Cisco Systems come in at over $7bn, Oracle's Larry Ellison has $6bn stashed away in the corporate back pocket and telecoms giant Cable and Wireless has similar amounts safely in the bank.

The practice appears to be historical. When many of these companies were starting out any cash was quickly pumped back into the company to fund continued research and development costs. As the industry has matured it is felt by many investors that such hoarding of cash to generate growth is no longer necessary.

It is worth noting that among the companies paying out dividends are IBM and Intel - both highly successful global companies with sizeable research and development budgets and both responsible for technical innovation over the years. So, again Microsoft hits the headlines for all the wrong reasons - this time it's the shareholder rather than the consumer that is left to pay the price.

Bloor Research is a leading independent analyst organisation in Europe. You
can find out more at www.bloor-research.com or by emailing mail@bloor-research.com .