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Thursday, May 21, 1998
Reality News Is Updated Every Monday And Thursday

Apple Rethinks Its Distribution Channels

By Jeff Valvano

Mitch Mandich, Senior Vice President of World Wide sales took the stage at the closing keynote of the WWDC to talk about the channel. Mandich mentioned that the first thing Apple looked at last September, when it began to rethink its retail strategy, was friendship. In other words, did these resellers care for Apple, did they advocate the product, did they understand the technology, or did they just carry the product, making no effort to keep up-to-date with the technology, and care little about actually selling the Apple product. What they found was a lot of the latter, according to Mandich. So they began to look at where they (Apple) had support, and advocacy. Outlets such as MicroCenter, with their Apple Store within a store, were a perfect example of something that was working to sell Apple products. And so Apple set out to mirror this approach in what they found to be the best of the best; CompUSA.

Channel Structure -Distributors

In the United States, Apple had 5 distributors, and now they have slimmed down to two. Ingram and Pinacor (previously known as MicroAge).

In Europe, Apple is down to 2-3 distributors over the major regions.

In Japan, and Asia, Apple will take the same approach as it did with Europe.

Channel Structure - National Reseller.

CompUSA is Apple's National Reseller.

Mandich emphasized the importance of thinning the top layer, making it easier for Apple's distributors to help Apple communicate better to the entire reseller channel, globally. Something they felt would be quite difficult with a mass of distributors. Apple is keen on making sure these people are trained on Apple products, their knowledgeable about solutions, and that they can discuss promotions and relay this information to Apple's resellers.

Resellers
When Apple pulled out of the various other retail chains (see Best Buy, Sears, Computer City, and so on) they put 200 Million dollars of revenue up in the air. 'This is the risk we took', stated Mandich. Mandich touted the fact that to sell your product in the vast market, you would automatically think 'many distribution points', but this will only work if your product sells its self, if you have top of the line advertising to promote the product, and you have an outpour of advocacy. Otherwise, you become 'over distributed', to the point that it is embarrassing as a customer to walk into a store where your products, 2 generations old, are covered in dust and unplugged. 'This was the state of Apple 9 months ago.'.

Mandich explained the benefits of the Apple Store within a Store at CompUSA, how CompUSA have benefited, how Apple has benefited, and even how mail-order catalogs have benefited from the arrangement. He mentioned that while catalogs are a great way to sell Apple products, and their importance is increasing quarterly, it isn't the best way to promote Apple, as a company. The mail-order catalog is a channel that is more for the second time buyer, who know what they want to buy and who understands the technology.

As of today, CompUSA stocks over 200 Macintosh software SKUs (Stock-Keeping Unit), but basically what they are doing is going straight to Ingram's top 200, picking those SKUs, and bringing them to the store. Apple is now focusing on getting CompUSA to recognize some of the great new software from startup and smaller companies, and in turn bringing these products into the store. Mandich also mentioned that Apple's software sales at CompUSA have risen across the board, and they are working to obtain this effect elsewhere in the marketplace.

The Retail Experience
Mandich also touched on the regional retail situation, explaining that CompUSA is not the only place Apple is selling its products. Mandich complimented the J&R retail experience in NYC, and he enthusiastically expressed his commitment to bringing the kind of customer experience from J&R into all of the CompUSA's and other regional retail outlets; where the customer doesn't have to look aimlessly for a salesman.

Mandich stated that in addition to these retail outlets, Apple has 8 mail-order catalogs, and 3600 reselling locations. He stated that he felt this was excessive, and Apple would be making some changes in this area.

The Apple Store
The Apple Store has sold approximately 50 million dollars worth of Apple product since November 10th, and they plan to sell 100 Million by November 10th 1998. Mandich threw up the idea of placing Macintosh software and partner software on the Apple Store, and how would they go about doing this through a distribution channel, while working with Ingram and Pinacor. The U.K. Apple Store has been slightly disappointing so far, but Apple realizes that Europe isn't at the e-commerce level and Internet level that the United States is. Apple Stores for Japan and Asia pacific are next on the list. Mandich also announced that United States channel resellers will soon have the option to order built to order systems for resale.

Channel Inventory
Apple also plans to continue to reduce their channel inventory. At one time, Apple ended a quarter with 2 Billion in inventory, sitting like dead ducks. Last quarter Apple had 250 million worth of inventory in the channel, it's lowest in the history of the company. Apple's channel inventory is about 4 to 5 weeks as opposed to Compaq, who's channel inventory is 90 days. In the long run, this will be better for developers who wish to bundle their software on the new Macintosh models.

Apple Service Providers and Reseller Locations
Apple has cut their 8000 services providers (repair centers) to 3500. Apple realized that a majority of these providers had obtained a license in 1985, and since then, have gone down the drain to the point where they are no longer qualified to service Apple products, and hence, Apple is pulling their licenses. Apple will also be streamlining its reselling locations, removing an addition 1,100 selling locations in the United States who no longer meet Apple's standards. Despite the large number at hand, Apple only sacrifices 11 Million dollars of revenue from this decision. In reality, this will help Apple, who spends an excess of money supporting these un-loyal resellers who portray Apple products poorly and provide a unsatisfactory experience for the potential Apple customer. Apple will also be making the 'Learn and Earn' program mandatory in the retail channel and will push to increase the amount of software SKUs carried by resellers.

Wave Bye-Bye to Some of those Mail-Order Catalogs
Mandich continually hinted at down-sizing the number of mail-order catalogs from 8 to 3 or 4, and possibly making it a policy for the remaining catalog channels to carry 800 or 1000 software SKUs instead of the 400 they currently carry. Bravo, Mitch.

Mandich also mentioned that Apple would be increasing the amount spent on advertising, from 25 million per quarter, to 50 million per quarter, over time. In closing, Mandich ensured that the plan was get Apple healthy again, and once Apple is healthy, everyone else could succeed.

For more information like this, and information on Rhapsody DR2, Apple's new hardware, and so forth, check out our WWDC 1998 Report, which we will continue to update due to the overwhelming amount of information still flowing in.

If you have any further information on this subject, please inform us.

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News Index

1)Apple Rethinks Its Distribution Channels

2)Yes, Apple Purchased Final Cut from Macromedia!

3)Apple's 'Think Seinfeld' Commercial

4)MacOS X - Official Overview

5)Apple Preps 300MHz G3 All-in-one: Artemis!

6)iMac to Ship with 56K Modem Due to Popular Demand?

7)Rhapsody for Intel is Here to Stay

8)This Week's Apple News

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Yes, Apple Purchased Final Cut from Macromedia!

By Jeff Valvano

On May 4th, after rumors were flying high about the possibility of Apple purchasing Macromedia's Final Cut video editing software, Apple posted a vague press release entitled 'Apple Acquires Technology From Macromedia'. The press release neither confirmed, nor denied whether the 'software' was actually Final Cut, and to our knowledge, and that of the various other media outlets, it was still unclear. Until now, of course.

While keeping a close ear to the events at last week's WWDC, we came across a question and answer session with Mitch Mandich, which finally ended our confusion on Apple's mistery acquisition. The quotes taken directly from the conference can be seen below.

Question : "You stated that Apple is primarily a Hardware company, how do you justify that with your current activities with the Macromedia folks?"

Mitch Mandich : "...we are really trying to go out and expand our software reach. I think it's very clear to all of you here; we want to make QuickTime the standard world wide. We are working really hard with it. Umm, the Final Cut decision is absolutely geared to make QuickTime a more integrated and stronger product."

Apple is committed to making QuickTime the industry standard for digital video authoring and playback on personal computers and over the Internet, and this acquisition brings further proof to their statements. We'd expect to see the product of this acquisition with QuickTime 3.5 or later.

If you have any further information on this subject, please inform us.

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Apple's 'Think Seinfeld' Commercial

Due to popular demand, we've posted a copy of the modified Think Different commercial that Apple ran during the final episode of Seinfeld last week. The .mov file is compressed to 3.5MB and requires QuickTime3. Is everyone happy now ? :)

Get it here...
Seinfeld - Apple Think Different Commercial

Many thanks go out to Cache-Computing for hosting the Apple movie file for us.

If you don't have QuickTime 3, Get it!

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Apple Preps 300MHz G3 All-in-one: Artemis!

By Jeff Valvano

With the release of the of the 233MHz and 266MHz versions of the PowerMacintosh G3 All-in-one successfully under its belt, Apple is ready to 'Think Faster' when it comes to these educational beasts. And may we add, Apple's pricing continues to improve.

What's New?
Sources positioned within the outer boundaries of Apple's educational ring have confirmed plans to announce a 300MHz version of the ever-popular PowerMacintosh G3 All-in-one, code named Artemis. According to our sources, the new version of the PowerMacintosh G3 All-in-one will ship standard with a 300MHz G3 chip and most notably, 64MB of RAM (as opposed to 32MB of RAM in all previous models).

Other Artemis images.
image 1[Artemis top], image 2[Artemis front].

According to our sources, the unit will ship in exactly the same plastics as the 233MHz and 266MHz versions of the PowerMacintosh G3 All-in-one, and will share an identical motherboard with three 7-in PCI slots, and 3 DIMM slots allowing a total of 384MB of RAM. A 15.1" (13.8-inch diagonal viewable image size) display is standard in all models.

The Price is Right
While pricing information has not yet been made final, sources report that the final price of the 300MHz All-in one will land somewhere in the range of $1999 to $2199. Quite impressive considering the additional 32MB of RAM, and of course, the 300MHz G3 processor.

The 300MHz PowerMacintosh G3 All-in-one will ship in a standard configuration, and will be available for custom configuration via the Apple Educational Online Store. Educational venues should expect the arrival of this speed daemon between June and July of this year.

Apple declined to comment.

If you have any further information on this subject, please inform us.

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iMac to Ship with 56K Modem Due to Popular Demand?

By Jeff Valvano

With the announcement of the iMac on May 6th, came a lot are sarcasm and objective remarks about the specifics of the iMac. When an ordinary consumer is considering the purchase of a new machines, they usually look at three things. First they look at what the machine has inside, hardware specific wise. Second they look at the price (though some would argue that the price is the first thing the average consumer looks at). And lastly, they look at the potential of the machine, say 2 years down the road; i.e. expandability.

The iMac meets the first condition pretty well, except for one semi-fatal flaw. A 33.6K modem, in comparison to a 56K modem standard on most PC compatible computers, and even the new PowerBook G3 Series. Being that the 'i 'iMac' stands for 'internet', this makes it all the more bothersome to potential buyers.

We'd stick right up for Apple and say 'Well, 90% of local ISPs (Internet Service Providers) do not support 56K technology as of yet, and even some major national ISPs for that matter.' And 'Yes, a large percentage of home users may not be able to take advantage of 56K technology due to the routing of their phone lines.' And finally, 'A standard 56K modem directly equals: price increase.' Nevertheless, Apple has started to realize that consumers like to have the assurance that they have the 'biggest, badest, fastest modem you can get', standard in their new machine.

Over the past week, a couple of sources positioned directly within Apple's hardware division have come forth and informed us that Apple has been considering making the change from 33.6K to 56K before the iMac hits the assembly line late this summer. Though they insist nothing has been made final, they've mentioned that even Steve Jobs himself has become increasingly aware of the consumers opinions and concerns.

We'll keep you updated.

If you have any further information on this subject, please inform us.

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MacOS X - Official Overview

With the dust starting to settle, we've had some free time to develop a markup of Mac OS X, which can be seen below. The markup should closely resemble the one shown at the WWDC (at least that is what we were aiming for), though we were never able to make out the descriptions from the webcast.

Mac OS X Overview
In addition to the diagram, we've published an e-mail authored by an Apple Europe engineer which gives a precise run down and description of the both the High Level, and Core OS portions of MacOS X. We hope this will finally clear up some of the confusion that our readers may still have.

Click here to view a full sized
image of the above graphic

------------------------------ Begin Apple Description ------------------------------

The newly announced Mac OS X (pronounced as "mac oh es ten") will bring many new features and removes the last remaining advantages that some other operating systems have over the Mac OS.
Here is an overview of the system architecture for Mac OS X (beta available early '99, shipping after summer '99):

Diagram
-------
------- -------- --------- -------
|Blue | |Carbon| |Yellow| |BSD |
|Apps| |Apps | |Apps | |Apps |
---------------------------------------
| | POSIX |
| --------------------------
| MACH 3.0 |
---------------------------------------

The user will see a Macintosh Finder desktop, as he/she is used to. But there will now be different 'classes' of applications:

Blue Apps
---------
This is the compatibility environment for existing Mac OS 8.x applications. Contrary to the existing BlueBox in Rhapsody, applications executing in this environment will -not- be running in a separate window or screen, but share the same desktop concurrently with Carbon and Yellow applications. However, if one of these "old" Blue applications does misbehave, it will take down all other Blue applications, but this will -not- disturb any of the Carbon, Yellow, BSD apps or even the MACH kernel. Blue applications will however not be able to take advantage of preemptive multitasking (unlike Carbon apps).

Carbon Apps
-----------
Applications using the cleaned up Mac OS API, called "Carbon", will run individually as separated tasks on MACH, which means they have the full preemptive multitasking and have an individually protected memory space. They are also not limited by a preset application heap size any more.

Yellow Apps
-----------
Applications based on the YellowBox API have the same runtime properties as the Carbon Apps, but are using a different API (YellowBox and Posix instead of Carbon).

It is a choice left to the developer if he develops his applications with Carbon or YellowBox API's.

From the user perspective, there is no difference between Carbon and YellowBox applications.

BSD
---
For developers only, the full BSD Unix environment with all tools and the Unix shell interface is also available. It is -not- needed for any of the other application environments and therefore not installed on regular user systems.

MACH 3.0 and POSIX
------------------
This is the next generation of the current Rhapsody Kernel. For performance reasons, it will not be a true microkernel implementation, but it will have all features, including SMP support. The kernel will include a new driver model and also include the networking portions, the filesystem implementation (primary filesystem is HFS+) and a full POSIX library. ------------------------------ End Apple Description ------------------------------

For more information on the events at the WWDC, check out our

WWDC 1998 Report

If you have any further information on this subject, please inform us.

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Rhapsody for Intel is Here to Stay

Finally, it has been officially stated by an Apple employee. Rhapsody Intel, as we told you last week, will continue to be developed up to, and way beyond Rhapsody for Intel v 1.0. Rhapsody for Intel will be the ideal server solution, and will contain everything you have heard about up to this point, plus a lot more. All Yellow Box MacOS X applications WILL run on Rhapsody Intel, and ALL Rhapsody Intel applications will run on MacOS X. This includes applications written in 100% pure Java using Yellow Box APIs.

The Yellow Box is completely cross platform. Rhapsody Intel will NOT include a port of Carbon, and therefore will not run MacOS or Carbon applications. The only way Rhapsody Intel could run Carbon applications would be for Apple to port the Carbon APIs to Intel (see Star Trek NG). Apple currently states that they have no intentions to do so.

Below is the unedited e-mail we received late last week.

----------------- Begin forward message ----------------- Subject: Re: Rhapsody/Yellow Box - RIP, Not! From: Jordan Dea-Mattson <xxxxxx@apple.com> Date: Wed, 13 May 1998 20:04:25 -0700 Dear Julian - Apple will be delivering Rhapsody 1.0 for Intel and will continue to deliver Rhapsody for Intel. Bertrand stated this clearly in his keynote. We are not planning Carbon for Rhapsody and we are not planning Carbon for Windows. Yellow Box is our cross-platform API. Yours, Jordan ----------------- End forward message -----------------

Developer Release 2 of Rhapsody Intel is expected to arrive in developers mailboxes in a couple of weeks. Rhapsody for Intel v 1.0 will contain mirror that of the PPC version, with the exception of the Blue Box. Rhapsody for Intel v 1.0 will contain the full MacOS UE, and look and feel.

Rhapsody DR2 PPC on WallStreet PowerBooks?
One of the most common questions we have been seeing over the past week is 'Will DR2 of Rhapsody run on the new WallStreet PowerBooks?'. We've received a number of mixed responses. Some say yes, some say no. Some Apple employees say it 'might', others say 'it won't'. If you have personally tried to install DR2 on a new WallStreet PowerBook G3, we'd love to hear about your experience.

If you have any further information on this subject, please inform us.

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This Week's Apple News

GoLive Ships CyberStudio 3.0

GoLive's CyberStudio 3.0, the ultimate web design application, is now shipping. GoLive has a limited-time $299 introductory offer (normal retail price $550). Upgrades are free to customers who bought the CyberStudio 2.0 after Jan. 1, $99 for others.

AppleShareIP 6.0 Public Beta

Apple has posted AppleShare IP 6.0b1, a new "unsupported" version of its next generation server, which will expire August 31

Get the Steamroller Ad

-Apple has posted the new Steamroller ad, which advertises the new WallStreet PowerBooks. (Requires QuickTime 3.0)

Three Things Only an Idiot Would Do...

1) Try to commit suicide by jumping out of their basement window.

2)While in a public bathroom stall, fill up a large flask with Mountain Dew and squirt it erratically under the stall walls of your neighbors stall while yelling, "Whoa! Easy boy!".

3) Walk out of talks with the government.

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