Apple opens first of 25 tech stores


TYSONS CORNER, Va. - A shopper at the Tysons Corner Center mall outside Washington yesterday saw the crush of a hundred reporters, TV camera crews and security guards and could imagine only one visitor.

"Who is this?" she wondered, "George Bush?"

No, it was Steven P. Jobs, co-founder of Apple Computer Inc., who made a splash showing off the company's first store in its 25-year history.

The unveiling of the store - it opens to the public Saturday - caused a stir in the computer industry, where the company is one of the best-known and, analysts said, least understood.

Investment analysts generally cheered the move as a way for Apple to better introduce its products to the public, although Apple's stock closed down 11 cents at $23.18 on the Nasdaq yesterday. The stock's 52-week high was $64.13 in August, and its low was $13.63 in December.

Visitors yesterday seemed impressed with the store, sort of a cross between the Gap and the Sharper Image with bold graphics, sleek design and a huge rear-projection screen beaming psychedelic images.

Devoted users of the company's products were especially enthralled.

"It's like Christmas morning," said Tom Bridge, who works for an Internet site called MacSlash in Bellefonte, Pa., one of scores of Web sites run by Apple's most hard-core customers. The sites track everything from product releases to the history of the company that Jobs and a high school buddy, Steven Wozniak, began in 1976 after tinkering with computers in a garage.

It's not the devotees, however, that the company must win over.

For all its name recognition, Apple is sixth in U.S. personal computer sales with less than 4 percent of the market.

The company is widely known for creative marketing: its eerie 1984 Orwellian commercial during the 1984 Super Bowl that introduced the Macintosh; its translucent, candy-colored iMacs; and its recent TV spots featuring actor Jeff Goldblum and musicians SmashMouth and Barry White pitching systems that make digital home movies and music CDs.

But the company has struggled to overcome the perception as the innovator that got outmaneuvered in the mass market by Bill Gates' Microsoft operating system.

"Not only does [Apple] own its own operating system, but it has iMovie and iTunes - and very few people outside the iMac community know about it," said David Bailey, an analyst who tracks the company for Gerard Klauer Mattison & Co. in New York.

Jobs, flanked by huge photos of John Lennon, Yoko Ono and a young Albert Einstein from the company's "Think Different" media campaign, acknowledged the challenge yesterday.

"Our goal is to capture the other 95 percent," he said while stalking a makeshift stage in blue jeans and a black turtleneck.

Apple has traditionally sold its products through licensed dealers, including warehouse stores such as CompUSA and BestBuy, and via the Internet.

But Ronald B. Johnson, Apple's senior vice president for retail, acknowledged that the company's products have received "inconsistent" presentation at the large electronics stores.

At a Circuit City store less than a mile from Apple's shiny new store, the Apple sales area had a ragged corrugated display and the iTunes demonstration unit was drowned out by another company's DVD display blaring movie clips.

Space for computers in those stores will shrink further as wireless devices and pocket-sized personal computers become more popular, analyst Bailey said.

When news of Apple's retail venture began trickling out in recent months, analysts noted that Gateway Inc., the fourth-largest computer retailer, was in the midst of closing 27 of its 326 "Country" stores. The analysts wondered about the timing and whether this was another case of Apple zigging while everyone else zagged.

But Apple said it plans a limited rollout of 25 stores this year, primarily in major markets. Among the locations are New York City's Soho district, North Michigan Avenue in Chicago and the Mall of America in Minnesota. Apple expects the stores to show a slight profit in fiscal 2002.

Apple's store launch in suburban Washington raised eyebrows among computer-industry watchers who expect anything of consequence to first occur in California. Jobs didn't make much of the location yesterday, simply saying the Tysons Corner store was ready first and that the market was valuable, with a tech-savvy, high-income population. The company is paying $500,000 annual rent on its 4,500-square-foot store, he said.

As with all the Apple stores, the Tysons Corner outlet has a "Genius Bar." It will be manned at all hours by an Apple expert who can answer customer questions (and who'll have a "hot line" to company headquarters in Cupertino, Calif., when he's stumped.)

There are also work stations where customers can make their own "iMovies" or burn music on a compact disc.

Jobs said he fell in love with an idea someone mentioned to him earlier in the day: Holding in-store contests for the "best home movie" made by various age groups. Companies who license software for Apple will also hold demonstrations and classes in the stores, he said.

"We don't have a brand new risky concept," said Jobs, who also built Pixar Animation Studios, which produced the hugely popular "Toy Story" movies. "We have a concept and it works. We have an extraordinary balance sheet and we have one of the most recognizable brands in the world."

But while Jobs dismissed any comparisons to recent failed technology ventures, there's no denying the weakness in the personal computer market.

Personal computer sales were down nearly 10 percent in the United States in the first quarter, according to International Data Corp., a research firm in Framingham, Mass.

IDC researcher Roger Kay said he once thought virtually every U.S. home would own a personal computer, but now doesn't believe it will reach such virtual saturation.

Dell Computer Corp., Compaq Computer Corp. and Hewlett-Packard, the top three sellers of personal computers, slashed prices last week as much as 31 percent. Last winter, Dell was forced to make its first large-scale layoffs, cutting 1,700 employees.

In March alone, sales of personal computers and related equipment were down 18 percent, from $16.1 billion in 2000 to $13.8 billion this year, according to NPD Intelect Market Tracking, of Port Washington, N.Y., which follows technology and electronics sales.

"It's just an economic downturn. Cycles come around," said Fred D. Anderson, Apple's chief financial officer and executive vice president.

Brett Miller, an analyst with A. G. Edwards & Sons in St. Louis, compared Apple's new store to Sony's Style emporium in San Francisco or Nike Inc.'s Niketown in Chicago - tourist attractions in their own rights.

A. G. Edwards upgraded the stock to a "buy" rating from "maintain" after yesterday's announcement.

"Apple's strategy is different than Gateway's. If they try to open 100 stores, I'm outta here," Miller said. "The tourist areas are where they're going.

"A woman is shopping at Donna Karan and her husband is sick of it and wanders into the Apple store. He has a camcorder and in five minutes he's made a movie and posted it on the Web and calls the wife over to see it. The stores are to build the excitement."

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