For the third time, Apple Computer has introduced a sleek new iMac machine with a revolutionary design. Though Apple says it plans to market the futuristic-looking computer to schools as well as consumers, analysts following the industry question whether the reconfigured iMac–which sells for a base price of nearly $1,300–will be enough to rescue Apple from declining sales in education, a market segment once critical to its success.

The latest computer in the iMac family literally puts Apple’s trademark minimalism on a pedestal. The processor and drives are built into a sleek, flat-panel display.

“A lot of people are going to be asking, ‘Where did the computer go?'” said Apple senior vice president Phil Schiller as he unveiled the new iMac on the opening day of the Apple Expo in Paris.

UM’s Dell deal could
save $2M a year

The University of Miami and Dell Inc. have signed an exclusive, campus-wide computing agreement that is expected to save the university approximately $2 million per year, Dell announced Aug. 31. The agreement reportedly is the first of its kind between Dell and a major university…


  • Available in 17-inch and 20-inch versions beginning in mid-September, the new iMac looks like a 2-inch-thick monitor. Inside, however, is a large hard drive, 256 megabytes of memory, and an ultra-fast processor of the kind reserved until now for Apple’s professional PowerMac desktops. CDs or DVDs disappear into the side of the white panel, as they are fed into a drive behind the screen.

    The announcement ended days of speculation about the launch, postponed from earlier this year because of inadequate supplies of the G5 processors made by IBM Corp.

    Schiller said the basic 17-inch model, with a 1.6-gigahertz processor and 80-gigabyte hard drive, would begin at $1,299. That matches the price tag of the first iMac model, a translucent, all-in-one, cathode-ray-tube design that sold 6 million units after its 1998 introduction and helped Apple draw a line under three years of losses.

    Apple isn’t the first computer company to introduce a flat-panel, all-in-one model. MPC Computers, IBM, and Gateway already sell machines with similar form factors–though these companies’ models are all more expensive than the new iMac. Still, even though Apple says it plans to market the new iMac to schools at a special education price, some analysts suggested the machine could be priced too high to become another hit.

    “We’ve moved forward on the market by six years, and I would have liked to see a lower price point,” said Roger Kay, a senior analyst with global IT consultancy IDC.

    “I also don’t know if an all-in-one has the same punch that it did in 1998,” he added. “I’m not sure it will be a slam dunk.”

    Analysts who follow the education market also are skeptical. “Price is definitely a factor,” said Jeanne Hayes, president and CEO of Quality Education Data Inc. (QED). Schools increasingly are looking at desktop machines as commodities, she said.

    Though Apple computers remain a favorite among artists, engineers, and others, Sean Gallagher, senior analyst for Boston-based Eduventures Inc., says schools now are gravitating toward other lower-priced manufacturers such as Dell and Hewlett-Packard, both of which have desktop machines that sell for less than $700. “The education market has always been driven by price,” Gallagher said. By slashing its prices and “commoditizing” the market, he said, companies like Dell have all but stolen the momentum from niche players like Apple.

    During his announcement of the new iMac, Schiller also demonstrated key features of Tiger–the next version of Apple’s OS X operating system, due for release next year.

    It was Apple that pioneered the use of point-and-click operating systems in commercial computing in the 1980s. But the company refused to license its software to other manufacturers and steadily lost market share to rivals using Microsoft–a slide that accelerated with the arrival of Windows 95.

    Apple’s global PC market share slipped to 2 percent last year from 9.6 percent in 1991, according to IDC figures, but edged up again to 2.2 percent in April through June of this year.

    The company’s school sales also have declined. Industry research firm Market Data Retrieval reports that Apple’s market share in schools fell from 31 percent in 2002-03 to 27 percent in 2003-04.

    QED, which plans to release its 2004-05 “Technology Purchasing Forecast” in September, expects Apple’s presence in schools will continue to decline in the coming year.

    But it’s not because teachers don’t like using the technology, said Hayes: “There has never been a lack of interest in Macs from the teacher level.” Rather, the real problem for Apple has been a lack of interest on the part of IT directors, many of whom have sought to standardize schools on the more popular Windows-based platform for simplicity’s sake, she said.

    Running on a single platform enables school IT personnel to alleviate compatibility hang-ups and reduces the number of headaches they have to contend with on a daily basis, she explained.

    As if to underscore her point, the University of Miami on Aug. 31 announced that it has signed an exclusive agreement with Dell to standardize on Dell machines campus-wide. The agreement is expected to save the university about $2 million a year (see related story).

    Still, Apple has scored some recent successes in its fight to remain a force in the desktop computer market. Apple says the runaway successes of its iPod music player and iTunes download site have helped boost computer sales–and deals like Apple’s agreement to provide incoming freshmen at Duke University with iPods have opened a whole new avenue for the company’s school sales. (See “Duke to provide freshmen with iPods.”)

    Apple also has continued its push for mobile and one-to-one computing programs in schools, including a much-publicized statewide laptop initiative in Maine.

    Despite the success of the iPod and iTunes, Cupertino, Calif.-based Apple still makes 60 percent of its revenue from computers. Sales of iMacs dwindled to 217,000 units in January through March, the lowest total ever.


    Apple Computer Inc.

    Dell Inc.

    Eduventures Inc.

    Gateway Inc.

    Hewlett-Packard Co.

    Market Data Retrieval

    MPC Computers

    Quality Education Data