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photo Beyond Luxo Jr : The next flat panel iMac
Is the iMac in trouble? Sales are down sharply from last year's, prompting dire screams of Apple-panic from the usual suspects. However, reality is far simpler than any pundits suggest. The next step for the consumer icon is, well, plainly obvious.

CNET, industry columnists and business magazines always need something to fill pages, and nothing does that quite as well as inventing some controversy or crisis for Apple Computer. This generally entails demanding that Apple do exactly what other industry players are doing, despite the fact that the PC industry largely lacks Apple's innovation and profits.

In fact, Apple has been doing so well lately that writers are scrambling to think up new lines. The old standbys, that the company needs to port their software to run on Intel processors, or Microsoft's Windows, or get bought out by some enormous, stagnant corporation, are all looking rather silly at this point. Still, the iMac is a mature product and sales are plateauing. So what's next? Well, before I state the obvious, let me deconstruct what everyone is saying and prove my point before I make it.

Whatever are you trying to say, Alex?
Last week, Alex Salkever of BusinessWeek suggested that something revolutionary needs to be done to the flat panel iMac. First he decided Apple needs to remove the iMac's screen, leaving a small box of Mac without any display. This unit, he suggests, would be useful for users who already "own an Apple laptop and want a second machine." How missing a display would drive iMac sales among consumers with laptops is hard to figure, unless Salkever had in mind that PowerBooks have a video input jack. They do not.

Jumping to a seemingly self-contradictory line of reasoning, Salkever next insists that Apple also sell an iMac display separately, and make the display so grand that everyone, even Windows users, would pay a premium to get it. So are consumers wanting a display or not? Or do they just want their iMac to come in two boxes? Salkever is clearly getting paid by volume, not weight; his article does indeed fill the page and inspired some controversy.



Those who fail to learn from history are...
The fix suggested for the iMac sounds suspiciously like the ill-fated PowerBook G4 Cube. You may have already forgot about the Cube. Certainly Apple would like you to forget about it, as much as they'd prefer you to Reaganize the Apple III, the Lisa or the laughed at Newton. The Cube was a nostalgic nod to the original NeXT Computer, which was so stunningly basic and beautiful that it now sits on display in our San Francisco Museum of Modern Art, next to a PowerBook G4.

But the PowerMac G4 Cube, like the NeXT Cube, suffered disappointing sales and never became popular. The Cube failed with good reason; it was premium priced, yet lacked the expansion potential of the regular PowerMac G4 towers, or the portability of the PowerBook G4. In fact, the Cube was an awful lot like a PowerBook, without being portable. It used smaller parts, a custom design, and like all things Apple, was over-architected to a fault. Its whizzy heat sensing proximity power button commonly failed, and its gorgeous plastic case frequently cracked. The Cube filled no void and fit no niche. It was retired.

In contrast, the iMac family has maintained popularity and healthy sales since its original release in 1998. Like the Cube, the iMac borrowed some smaller parts from the PowerBooks. But like the PowerMac towers, the iMacs used common, full size hard disks and optical drives. This helped keep the iMac at a popular price point.

If the Cube was a candle lit for the original NeXT computer, the iMac was a monument to the original Macintosh. To see the next logical step for the iMac family, take a look at why the first Mac worked, and how its hit and miss offspring succeeded or failed as they continued along, or strayed from, the principles of its success.

Why the Mac Worked
The first impression from working at a computer comes from its display. The original Mac had a tiny black and white monitor. Unlike other displays from its time however, the Mac's was precise and sharp. It used square pixels to aim at perfectly representing a monochrome page rather than the sloppy screens of the typical PC of the day, which only needed to throw up sixteen fuzzy primary colors of flashing text. The Mac had an array of ports built in for common peripherals, so installing a printer meant simply plugging it in. On a PC, you generally needed to install a parallel printer card first, and then mess around with its settings.

The original Mac was simple, compact, ready to run, generally affordable and performed decently, just like the iMac of today. In between, Apple halfheartedly cranked out a number of duds for the consumer market. Looking at why they never took off as runaway success stories helps explain where the iMac needs to go in the future.

From 1984 on, Apple improved upon the original Macintosh while it kept the same basic design for the next three years. Then in 1987 Apple introduced the Macintosh II, targeted at business users. It took the form factor of a PC: a larger box using an external monitor and slots for expansion cards. Macs were going high end; Apple would maintain their virtual monopoly on graphics oriented computer work for the next decade. New Macs managed high profits through their astronomical prices, and Apple largely ignored the home consumer market because, by comparison, there was no money in it.

To illustrate: in 1990, Apple was selling: the blazing Mac IIfx at $10,000 to $12,000, the nice Mac IIci at $6700 to $8800, the decent Mac IIsi at $3800, and the crippled Mac LC at $2500. The LC was basically a three-year-old Mac II with less speed and no expansion. If that wasn't sad enough, they also repackaged the five-year-old Mac Plus as the Mac Classic for $999 to $1500.

With trends like these, who needs abilities?
Essentially, Apple was able to sell its high end Macs at so high a price point that the only way to reach down to the home consumer market was to resell them nearly obsolete trash. To prevent sales competition with high end Macs, the LC series was so severely crippled that its limited video prevented users from even running many Mac software titles, and particularly games. That's a low blow for a $2500 consumer machine!

Then things changed. As the PC became a commodity and prices fell through the floor, Apple was forced to compete. By 1996, Microsoft had improved Windows enough that a PC running Windows 95 looked pretty much like a Mac. There would be no more $8000 Macintoshes.

The transition to PowerPC processors in 1994 was largely an effort to both gain ground in speed and cut costs. Apple also adopted cheaper industry standards such as PCI expansion slots and IDE drives. The result? The original $1299 iMac of 1998 was as fast as the $2000 PowerMac G3 desktop from the previous year. CRT-based iMacs branched out into different configurations, all within the $999 to $1499 price range. The flat panel iMacs introduced in 2002 extended the ready to go, plug and play iMac line an innovative, thin form factor. Along with the eMac for education, the entire lineup has mostly stayed within that price range.

Unlike previous attempts to create consumer products by crippling or repackaging garbage, the iMacs offered decent, useful performance at a good price. Additionally, like the original Mac, the iMacs come ready to go in a complete, small, all-in-one package. That has translated into success.

What industry thinkers need to realize is that Apple's margins on the iMac are slim enough that they simply can't introduce a considerably cheaper "headless" iMac without returning to their former ways of recycling trash from five years ago. We already have a way to obtain outdated Macs without a display; it's called eBay. The prices there are right in line with what armchair warriors think Apple should be selling. Could Apple compete with their own secondhand products? If you are still shaking you head yes, then you need to keep reading.


Will they get what they pay for?
Pundits complain that, had it been cheaper, the Cube may have done better. But would it? There is another failure to point at on the low end: the Bandai Pippin. The 1995 Pippin at $599 wasn't just recycled junk; while it certainly wasn't up to par with a $2000 PowerMac, it did have better performance all around than the Sony PlayStation of its day. Yet this headless consumer Mac did not result in success.

Additionally, there is another reason why a cheap, headless iMac would lack its imagined target market. It's almost hard to believe, but half of the US is functionally illiterate. Gasp! The masses are not interested in buying a cheap internet terminal iMac because they wouldn't know what to do with it. They are instead buying PlayStation 2 and Xbox, which only require mastery of fewer than ten buttons, which are marked with shapes and colors, and not many words.

There simply is not a huge market of people clamoring for Macs under a grand. Apple knows this, and that's why they are not trying to market $500 headless iMacs dreamed up by a critic on a deadline. The only thing $500 Macs could possibly accomplish is an erosion in sales of iMacs that sell at reasonable profits.

Considering that Apple is successfully selling hard drives wrapped in a GUI for $500, it's a bit silly to imagine why they would want to throw in an optical drive, video, a faster processor and a mouse and keyboard for the same price.


The case of the missing iMac buyers
Still there is this issue of stagnant sales of Flat Panel iMacs. Is the market suddenly rejecting the iMac? If the iMac was selling like the Cube, Apple would simply give up on it. It is far more likely that the 27% drop in iMac sales, which occurred at the same time as the PowerMac G5 was introduced, was... consumers up-selling themselves to a G5!

In 1990, the difference between a gutless Mac and a high end Mac was well over $6000. Today, you can jump from an entry G4 iMac to an ultra high end dual G5 for less than a couple grand. Apple has publicly stated in their 10-K report that Mac prices were lowered to boost sales volumes "in response to industry pricing pressure."

No need to decapitate the iMac. Consumers aren't looking for two boxes; they just want something fast, cool and sexy. This winter, the new G5 was simply far sexier than the two-year-old G4 igloo with a billboard, whose fanciful shape has grown tiresome and is no longer worthy of mention at the water cooler.

For everything, there is a season
Still, the iMac has a place in Apple's plans, it's just due for an overhaul. First off, there are some things that need to get cut. That funky arm is more whizzy than functional. I sit in front of a Cinema Display plenty, and have never had the urge to flip the screen up and down and around on an arm. Yes, it makes for a fun demonstration in the Apple Store, but apart from that, it's a big waste of a heavy chunk of metal.
Second, that igloo underneath has got to go too. What is that about anyway, the anti-Cube? Between the heavy igloo and the light, flopping screen (inspired by a daisy apparently), the iMac is awkward to carry, and worse to service. It requires a special foam mold to lay it on its side to prevent it from rolling around or stressing the display. The tight space in the igloo requires special handling on disassembly and the application of thermal paste on reassembly so the heat pipes can wick enough heat from the processor. Ugh. Although not my least favorite Mac to fix, the iMac is certainly not fun to crack open.

Apple evidently knows less is more. Steve, just take a Cinema Display and slap three inches of Mac on the back. Nobody cares how thin the Cinema Display is; it takes up the same space with or without that Mac backpack attached anyway. Schools would love it; designers would love it; shoot, anyone with a desk and no desire for a large tower underneath it would love it.


The Cinema Display iMac.
It costs virtually nothing to develop. Just slap an Xserve or PowerBook logic board on the back, with a full size hard drive and an optical drive that ejects the CD out the side of the display. It's cheap, it's easy, and it's a machine worthy of the iMac name. 

All its ports on the side, and nothing to plug in but a power cable. A zero footprint Mac that might even fit into the same box as the existing Cinema Displays. No need to go nuts with innovation here; turn Jonathan Ive loose on the next iPod, or have him embarrass Sony with a far superior camera phone.

And suddenly, the Mac brand coheres: the simple iMac for consumers, the PowerMac for pro users. They look the same, apart from the PowerMac having a separate aluminum box with almost as many fans as the XFL. Apple can even announce the next iMac as a comeback: It's the Cube without a cube. It's simply the next obvious step for the flat panel iMac.


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