Apple Forced To Retrench Computer Maker Pulls Macs From Most Chains

Apple Computer Inc., hammered by falling sales, on Monday said it would pull its Macintosh computers from major national retailers to focus on CompUSA, the biggest U.S. chain devoted to PCs.

Apple’s stock plunged more than 3 percent on the latest retreat by the one-time computer pioneer, which is trying to focus its limited resources on popular outlets for its Macs. Analysts said the move, intended to help Apple boost sales at CompUSA while cutting costs, will also sacrifice needed visibility on store shelves as the company struggles to rebound.

Apple is phasing Macs out of Circuit City, Computer City, Office Max and Sears. Best Buy announced last week that it was dropping Apple computers from its stores because of slow sales.

In addition to CompUSA’s 148 stores, Apple will continue to be sold in regional retail chains, specialized Apple dealers, computer dealers and catalogs.

With its once-dominant share of the PC market shrinking to 3.1 percent as of the end of last September, Apple had little choice but to cut back, analysts said.

Apple sold 25 percent fewer computers last year, or 2.66 million units, even as overall sales of personal computers surged, according to Computer Intelligence. The industry research firm expects Apple’s sales to drop an additional 10 percent in 1998 as customers continue to choose less expensive PCs that run on Microsoft’s Windows operating system.

The pullback is “an admission of lack of success in selling PCs in those channels,” said Dave Tremblay, an industry analyst at Computer Intelligence.

Apple said sales of Macs at CompUSA have grown since the chain began more aggressively promoting Macs with in-store displays last year. CompUSA focuses more on education, design and publishing, important Apple markets.

Mitch Mandich, head of Apple sales and support in the Americas, said cutting costs was a minor reason in the decision to pull back. He said stores weren’t promoting Apple products aggressively enough and “we felt it better to consolidate around fewer stores in order to get visibility and volume.”

But selling to retail outlets can be expensive, observers note, requiring visits by salesmen, joint advertising, and, in many cases, fees paid to stores to get shelf space and promotional displays.

And Apple’s strategy of limiting its products to one national retail chain could be risky if Apple’s relations with CompUSA sours. Last week, for example, Radio Shack decided to replace IBM computers in its 7,000 electronics stores with Compaq PCs.

“There’s no question that a risk would be either CompUSA’s business takes a slide at some point or there are some other problems,” said Tim Bajarin, president of Creative Strategies Research International, a San Jose, Calif.-based research and consulting firm.

Others said the pullback further relegates Apple to the status of niche player, selling to a limited market of graphic artists, educators and other consumers.

“If I was an Apple owner, I would be very disappointed right now there wasn’t a place (in my area) I could go to get Mac products. That doesn’t give me any choice as a consumer,” said David Goldstein, president of Channel Marketing, a Dallas-based research and consultant firm.