updated 1/10/2005 6:04:05 PM ET 2005-01-10T23:04:05

Steve Jobs, chief executive of Apple Computer, takes to the stage on Tuesday at the Macworld trade show in San Francisco, a highly anticipated appearance that some observers believe could mark a significant strategic shift for the high-end niche personal computer maker.

That is because the rumor-mill has been rife with speculation over the past few weeks that Apple will unveil a so-called "headless Mac", a bare-bones entry-level PC without a monitor aimed at mass-market consumers who have long been put off by the company's high prices.

If true, the "headless Mac" is likely to be one of several new products announced during the week-long Expo, which coincides with Apple's fiscal first-quarter earnings report on Wednesday.

Mr. Jobs is also expected to unveil a cheaper, lower-capacity version of Apple's wildly popular iPod digital music player, one which stores music files on flash memory chips instead of the mini hard disk drives that the current iPods use.

Video: Macworld Preview New products like these would signal an important shift in strategy for Apple, which has long prided itself on designing premium PC products. Some analysts say these mass market offerings would enable Apple to capitalize on the success of the iPod. Analysts now expect Apple to report that it sold as many as 5m iPods in the latest quarter, nearly as many as it had sold since the launch in 2001.

But while Apple controls some 90 percent of the hard disk drive music player market, it has been absent in the flash memory segment, which is estimated to be at least twice as large and growing faster.

'Halo effect'
More intriguing and much more significant is the possibility that Apple would launch an entry-level PC that would sell for less than $500, about $300 less than its current cheapest model and $800 less than the flagship iMac. Analysts have been predicting that the iPod would generate a "halo effect" in which consumers drawn to it would discover and start buying Apple PCs as well. With the Apple brand soaring, the moment to strike could be now.

Some analysts argue that new customers who buy a "headless Mac" would learn to appreciate Apple's OS X operating system, which is widely considered superior to Windows, Microsoft's operating system that has been battered by viruses and spyware. Those customers would be more inclined to stay with Apple PCs as they moved upmarket.

However, introducing a stripped-back Mac would carry significant risks. First, the company would enter a cut-throat market in which the competition is fierce, the margins razor-thin and where only Dell has shown itself capable of racking up consistent profits.

Apple would have to sell millions of machines, a potential problem for a company that has been unable to keep up with demand for its products. Also, new PCs might hit sales of Apple's more expensive machines.

The mood is expected to remain upbeat on Wednesday with Apple's earnings, which analysts expect will easily exceed expectations, largely as a result of brisk iPod sales. Laura Conigliaro, analyst at Goldman Sachs, estimated that iPod sales would account for about 33 percent of Apple's $3.2 billion quarterly revenues, up from 23 percent in the previous period. The iPod also helped drive higher consumer traffic at the company's 102 retail stores, prompting Goldman to forecast that the stores would account for 18 percent of overall sales, up from 16 percent three months earlier.

© The Financial Times Ltd 2013. "FT" and "Financial Times" are trademarks of the Financial Times.


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