BusinessWeek examines Apple’s ‘paradigm shift’ into electronics and services; reports 400,000 .Mac s

“Rather than accept being a niche PC maker, Steve Jobs is transforming his baby into a high-end consumer-electronics and services company,” writes Jane Black for BusinessWeek ina Special Report on “Apple’s Strategic Shift.”

Black looks at how Apple is transforming itself with such products as the acclaimed iPod, “Steve Jobs & Co. stunned analysts by announcing they had sold 304,000 players in the company’s third quarter, nearly four times most analysts’ expectations.”

Black reports, “‘It’s a paradigm shift at the company,’ says Charles Wolf, an analyst at investment firm Needham & Co. and a longtime Apple watcher (who owns shares of Apple stock). ‘They are redefining what kind of company they are.'”

Black writes, “a look at Apple’s balance sheet reveals why it’s so anxious to broaden its audience beyond the Mac’s niche audience. In its third quarter, which ended June 30, Apple earned $428 million in gross profit, a 27.7% margin on sales of $1.55 billion, but it spent $419 million on operating expenses, leaving it with an operating margin of just 0.6%. ‘Apple’s gross margins are the envy of the industry,’ says IDC analyst Roger Kay. ‘But below the line, they give it all back. They pour money into R&D and [selling, general, and administrative expenses]. They have expensive retail locations and high-end advertising. It’s a Cadillac operation.'”

Black looks at the dramtic success of Apple’s portable line, especially the iBook, where, “In the third quarter, iBook unit sales jumped 43% from the quarter before, while revenues from the machine rose 30%.” And Black examines the potential upturn of fortunes that could result from the introduction of the Power Mac G5.

And Black reports, “Its .Mac initiative, which provides Web hosting, e-mail, and a variety of multimedia services, for $99.95 per year, is also turning out to be a sleeper hit. According to tech publisher O’Reilly & Associates, about 400,000 Mac users have signed up.”

Full article here.

10 Comments

  1. I don’t need .mac personally but I think it’s a great option to offer (mainly for iDisk–and especially with Panther’s iDisk). I’m glad it’s holding its own.

  2. It sure is nice to see some positive coverage of Apple. I didn’t even see the the word “beleagured (or however you spell it).” Let’s hope that this is the start of a trend!

  3. Make that 399,999 .mac users if I can’t renew for $49.99. $100 is way too much for what .mac offers. What have they given me besides free outdated games? And decent Jaguar training that I don’t need.

  4. .Mac is awesome. It allows me to access my address book, calendar, files and even bookmarks from any of my Wintel or Mac PCs. It is the perfect integration of Internet and PC. I didn’t realize how much I needed it till I started using it. And, it especially showed its strength when I installed OS X on a new partition and iSynch automatically brought over everything I needed from my .Mac subscription. Every Mac needs .Mac.

  5. Fred, what does Dell have to do with .mac? I’m sorry, but Apple is nickel and diming me to death. $30 for QT Pro. $50 for .mac. $130 for Jaguar. Now they want $100 for .mac renewal. $130 for Panther.

    I think they should throw in a free .mac subscription with the purchase of Panther.

  6. Since only 400,000 users have signed up for .Mac, it is clearly not right for everyone – but it is right for 400,000 of us. I absolutely get more than $99/yr of value out of it. Of course, I also spend $200 for a pair of jeans, $700/yr on coffee, $40k for a car that I drive 5 miles a day, etc. In the grand scheme of things, the 27 cents a day that go toward .Mac is nothing.

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