Apple blames high demand. Early buyers point to nettlesome production problems.

Image: Apple, Inc.

"The new iMac has been a huge hit and we are working hard to fulfill orders as quickly as possible."

That's the official line Apple (AAPL) public relations is putting out to explain delays that have pushed shipments of the new 27-inch iMacs past Christmas. And indeed, sales of Apple's desktop computers in October and November were up 74% from the same period last year, according to Piper Jaffray's Gene Munster.

But customers who took delivery in the weeks after the machine's Oct. 20 launch tell a different story. "I have been experiencing some problems with the all new iMac 27 inch display," wrote Belgian user Jan Sampermans on Oct. 27 in the first of 1,279 messages on an Apple support forum entitled New iMac 27inch screen flickering/tearing/shutoff. "In the course of writing this post my screen has flickered 13 times and has gone black 2 times."

As of Tuesday morning, the discussion thread he started had drawn 198,500 views, and a YouTube video of a stuttering iMac screen had been watched 45,466 times.

Below the fold, a chart tracking this and the other iMac production issues. It was begun by a Canadian Web designer after his 27-inch model arrived with a cracked screen.

Source: Scott Pronych. http://imac.squeaked.com/

Apple has not said what it's doing to correct these problems. Its online store won't guarantee delivery of 27-inch iMacs earlier than two weeks from today — that is, until four days after Christmas. According to another heavily subscribed Apple discussion forum (306,255 views), authorized resellers have been experiencing delays of up to two months.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Meet the creative director who named a generation of Apple products

Photo: Apple

The TBWA\Chiat\Day creative team was horrified in 1998 when Steve Jobs pulled back a cloth and revealed the bulbous teardrop that came to be known as the Bondi-Blue iMac.

But then Jobs wasn't so crazy at first about the name they proposed for it.

No one had ever seen anything like the new computer, veteran creative director Ken Segall tells Cult of Mac's Leander Kahney in an exclusive interview published Tuesday evening.

"We were pretty shocked but we couldn’t be frank," Segall recalls. "We were guarded. We were being polite, but we were really thinking, 'Jesus, do they know what they are doing?' It was so radical."

Segall eventually came up with "iMac," a name that connected the original 1984 Macintosh with the rapidly expanding Internet. But Jobs took some convincing.

Below the fold, excerpts from the story as Kahney tells it:

Photo: Ken Segall

Jobs said he was betting the company on the machine and so it needed a great name. He suggested one at the meeting, Segall says, but it was terrible. It would “curdle your blood.” …

Segall says he came back with five names. Four were ringers, sacrificial lambs for the name he loved — iMac. “It referenced the Mac, and the “i” meant internet,” Segall says. “But it also meant individual, imaginative and all the other things it came to stand for.” It “i” prefix could also be applied to whatever other internet products Apple was working on.

Jobs rejected them all, including iMac.

“He didn’t like iMac when he saw it,” Segall says. “I personally liked it, so I went back again with three or four new names, but I said we still like ‘iMac.”

He said: ‘I don’t hate it this week, but I still don’t like it.’”

Segall didn’t hear any more about the name from Jobs personally, but friends told him that Jobs was silk-screening the name on prototypes of the new computer. He was testing it out to see if it looked good.

“He rejected it twice but then it just appeared on the machine,” Segall says, laughing. “He never formally accepted it.” …

Segall is delighted that iMac grew on Jobs. “It’s a cool thing. You don’t get to name too many products, and not ones that become so successful. It’s really great. I’m really delighted. It became the nomenclature for so many other products. Millions of people see that work.”

Segall says over the last few years, the debate about dropping the “i” prefix has come up several times at Apple. “They’ve asked: ‘Should the company drop the “i”?’ But there’s a desire to keep it consistent: iMac, iPod, iPhone. It’s not as clean as it should be, but it works.”

You can read more of the interview, including the story of how the "Think Different" campaign got started, at Cult of Mac here.

Also worth visiting: Segall's own blog, Observatory, with his commentary on everything from Motorola's (MOT) Cliq ads (he loves them) to Research in Motion's (RIMM) appropriation of The Beatles' All You Need Is Love (hates it; "they’ve successfully broken the gall barrier.").

Kahney, the former news editor of Wired.com, is the author of several books about Apple (AAPL), including most recently Inside Steve's Brain.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Photo: Apple Inc.

Apple's (AAPL) surprise announcement Tuesday of four new or updated product lines — iMac, MacBook, Mac mini and a touch-sensitive "Magic Mouse" — does at least three things:

1. Builds on the momentum created by the blowout earnings announced Monday
2. Gives customers a reason to reconsider Apple's desktop machines
3. Keeps the press from writing about Microsoft's (MSFT) Windows 7 — set for release Thursday — for at least another day.

The second point was underscored in a note to clients issued Tuesday afternoon by Piper Jaffray's Gene Munster. He points out that Apple achieved an 17% increase in computer sales last quarter despite fighting the "headwind" of desktop machines that had grown increasing long in the tooth. Desktop unit sales were down 16% year over year last quarter, compared with an astonishing 35% increase in MacBook sales.

The new machines — especially the thinner, faster iMacs — could change that.

"In other words," writes Munster, "the headwind that existed in the Sept. quarter due to aging Mac desktops has now turned into a tailwind for Mac units in the Dec. quarter."

The best place to learn about the new machines is probably Apple's own website. We're particularly fond of the little video industrial designer Jonathan Ive recorded about the new iMacs, pasted below the fold.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

The rumors of a flurry of new machines were true

Photo: Apple Inc.

UPDATE: Apple's online store came back online shortly before 1 p.m. Eastern with new iMacs, a new MacBook, a new Mac mini and a new "Magic" Mouse (the Mighty Mouse having run into trademark problems). The products are displayed on the reconfigured website and described in a series of press releases:

• The new iMacs
• The new MacBook
• The new Magic Mouse

Apple's website describes a new "mightier" mini, but no press release on that yet.

- – - -

Apple's (AAPL) online store went off line Tuesday morning, adding fuel to rumors that it held its quarterly earnings call a day early to clear the decks for the release of some new hardware.

The Apple blogs have been predicting this for weeks, none more succinctly than Daring Fireball's John Gruber, who responded to a provocation from Dan "Fake Steve Jobs" Lyons with this cryptic note:

Dan Lyons Apparently Thinks Yours Truly Hasn’t Heard About the Redesigned Plastic MacBooks, Redesigned (‘Impressive’) iMacs, Updated Minis (Including One That Ships With Mac OS X Server), the Multi-Touch Magic Mouse, and, as the Wildcard I’m-Not-Sure-I-Re

Unseemly for the Fake Steve character to be so wrong (or, frankly, even to care) about what I know.

By Thursday, I'm sure everybody will be talking about Windows 7 again.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

It's 4 a.m. and the Apple Store has disappeared. Could this be the day the new iMacs appear?

[UPDATE: False alarm. By 4:45 a.m., the store was back online. Reader Pierre in Montreal spotted a new version of FileMaker's Bento, which appeared to be the only change.]

Talk that Apple (AAPL) was preparing to refresh its best-selling desktop computer line has been building for  months, and on Thursday AppleInsider's Kasper Jade reported that the new machines had already been rolling off Taiwanese assembly lines for roughly two weeks.

According to Jade's report, the new iMacs — the "most versatile ever" — will have:

• More affordable pricing, subsidized to some extent by the iPhone's extraordinary profit margins
• Thinner industrial design, possibly patterned after the 24" LED Cinema Display Apple introduced last October.
• Blu-ray support, despite Steve Jobs' characterization of the high-def video technology's licensing issues as a "bag of hurt"
• New features catering to the "semi-professional audio/video crowd," including, according to the French site Mac4Ever, a built-in SD camera card reader

The iMac line is certainly due for some attention. According to MacRumors' Buyer's Guide, Apple refreshes its desktop line on average every 220 days. It's been 210 days since Apple did anything new with the iMac, and that was a routine upgrade of memory, storage and graphics capability.

"An announcement could come anytime between next week and mid-October," AppleInsider wrote last week. "Put simply, it's up to marketing to press the 'Go' button."

A report last week that Apple (AAPL) is preparing to slash prices on its entry level MacBook and iMac models has triggered a flurry of speculation about what the new price points might be.

According to AppleInsider's Kasper Jade, Apple sees the cuts — which could come in the next month or two — as an "interim solution" to the growing popularity of netbooks, those sub-compact laptops that Steve Jobs once dismissed as "a piece of junk" but which are flying off the shelves at $299 to $349 apiece.

For example Acer, whose Aspire One netbooks are Amazon's bestsellers, saw its U.S. market share grow 49.4% (to 13.6%) in the first quarter of 2009, according to Gartner Research, even as Apple's share shrank to 7.4%, down 1% year to year. Mac sales actually fell last quarter for the first time in nearly six years.

How low will Apple go to turn that around? Jade's reporting — based on unnamed sources "familiar with the matter" — is fuzzy on that point, but in the comment stream he makes it clear that he's talking about price reductions in the range of $100 to $150.

Applying these cuts to the current entry-level machines, we get:

• White 13-inch MacBook: $849 – $899, reduced from $999
• 20-inch 2.66 GHz aluminum iMac: $969 – $1,019, reduced from $1,119

With gross margins last quarter of 36.4% — up from 34.7% in Q1 — Apple can certainly afford to sacrifice some profit to grow share. As AppleInsider points out, Apple last month started selling 2GHz iMacs to the education market for $899.

The real questions is, will it work? Will consumers who are buying $349 Acers — or like Microsoft's (MSFT) Lauren, $699 HP (HPQ) Pavilions — give the MacBook a second look if it's priced at $849?

Would you?

Mac OS X 10.6 Snow Leopard, the update of Apple's (AAPL) current Macintosh operating system that Steve Jobs said would ship in "about a year" when he introduced it last June, may not arrive until later this summer or fall.

That's one of the nuggets of news offered by Kaufman Bros.' Shaw Wu in a report to clients issued Wednesday.

Among other findings Wu turned up in a check of his sources in Apple's supply chain and distribution network:

• Mac build plans have increased. Due to stronger-than-expected reception of Apple's newly introduced Macs, Wu says that the Street's current estimates of 2.2 – 2.3 million Macs shipped in the March quarter may turn out to be on the low side.
• New products in the works. Commenting on recent speculation about an Apple netbook, Wu says his sources suggest that "several initiatives" are being worked on, including perhaps a smaller MacBook Air or "MacBook mini" (essentially a netbook) and oversized iPod touches.
• The Mac mini is a "sleeper hit." Wu is seeing "surprisingly positive feedback" on Apple's cheapest Mac. He would liked to have seen lower prices, but he says the $599 display-and-keyboard-less box is being "warmly received" for its  larger hard drive, faster processor and NVIDIA graphics chip.
• Delayed quad-core iMac. Wu, like many other hardcore Mac users, was hoping for a quad-core iMac, as opposed to the dual-core machine Apple released last week. Now he says it makes more sense for Apple to wait for Snow Leopard, which takes better advantage of the quad core processors, and for lower-power parts from Intel that don't run quite so hot.

Wu's track record on Apple hardware predictions is mixed. He correctly predicted the release of new desktop Macs, but he also said that they would be unveiled two months earlier at Macworld, along with a new combination Apple TV/Time Capsule that never materialized. (link)

Apple has yet to respond to our request for comment.

In reviewing Apple's (AAPL) new desktops Tuesday, some analysts chided the company for not setting "more aggressive price points," as Kaufman Bros.'s Shaw Wu put it, given today's "tough macroeconomic environment."

But not Oppenheimer's Yair Reiner. He did a spec-by-spec comparisons with comparable Dell (DEL) and Hewlett-Packard (HPQ) machines. His surprising conclusion, given Apple's reputation for premium pricing: he found the new iMacs to be "a better value than competing Windows-based products." Specifically…

"A side-by-side comparison suggests the new iMacs match up favorably against Dell  and HP's All-in-One's on a price-to-performance basis. For example, the $1,499 model has a faster CPU and RAM with better or comparable graphics, and is still $100-$250 cheaper (though it lacks a TV Tuner, ~$60-$100 upgrade)."

To get a feel for what he's seeing, I've pasted one of his charts below:

See also: Marketing by spy shot: New Macs (with specs)

In a survey that found planned spending on consumer electronics at its lowest level since 2002, things are looking marginally better for Apple's laptop computers.

The ChangeWave Alliance survey — conducted among 3,115 consumers between Feb. 2 and Feb. 9 — found that of those who expected to buy a computer in the next 90 days, the percentage who planned to buy an Apple laptop was up 2 points, to 30%.

This follows a January survey that recorded the second sharpest dip in planned Mac purchases since ChangeWave starting tracking Apple's computers. The sharpest dip, reported last September, sparked a massive sell-off in Apple (AAPL) shares. See The survey that squashed Apple, Part 1 and Part 2.

ChangeWave research director Paul Carton notes that the January fall-off in Mac purchases predicted by his survey showed up, right on schedule, in the NPD data released one month later. See Report: Mac sales off 6% in January; iPod off 14%.

Meanwhile, things are not looking so good for the increasingly long-in-the-tooth iMac and Mac Pro lines. Planned purchases of Apple desktop computers, which had held steady in the January survey, fell a point in February, to 26%. A refresh of the iMac line, widely anticipated at January's Macworld Expo and now expected sometime this quarter, could turn that around.

"I expect we'll see Apple muddling through," Carton told reporters in a conference call Wednesday afternoon. But he added that while Apple's share of the pie may be growing slightly, the pie itself — that is, the percentage of consumers planning to buy any computer — has shrunk to the lowest level ever recorded in a ChangeWave survey: 6% for laptops and 4% for desktops. (In June, 2007, those numbers were 12% and 7%, respectively.)

Apple is holding up better than say, Dell (DELL), Carton suggests, because its customers continue to express satisfaction with their purchases, as indicated by the chart at right. More than 80% of Apple customers declared themselves to be "very satisfied" with their new computers.  Most of the manufacturers of comparably-priced PCs found themselves in the 50% to 55% range.

As for the broader economy, a slight bump in planned consumer spending recorded in ChangeWave's January survey was completely wiped out in its most recent polling. Better than three-in-five U.S. respondents (61%) said they expect to spend less money over the next 90 days, a 4 point decline in one month. See the chart below:

When the red (spend less) and blue (spend more) lines crossed in January 2008, Carton declared that the U.S. economy was headed into a recession — a call that turned out to be right on the money.

From the ChangeWave Alliance Web site:

ChangeWave runs a proprietary research network of 20,000 highly qualified business, technology, and medical professionals — as well as early adopter consumers — who spend their everyday lives on the frontline of technological change. (link)