Given the events of the past 6 days or so, we decided to compile and present to the public our private coverage of the false rumors that were running rampant in the Mac community, and even gained a lot of traction. Some might wonder why we waited to comment publicly on this until after the dust settled. If you remember correctly, the past several times we played "Truth Patrol" on some rumors we were portrayed as being "big, bad mean bullies beating up people for their lunch money." So this time, we kept quiet.
The relevant items will be covered in chronological order to keep things in perspective. With that said.
For a short spell yesterday we were sent running down false rumors that had Bearish connotations for both Apple (AAPL.O) and CompUSA (CPU.N). After all was said and done, we knew what the motives behind those trying to sow those false rumors were and we didn't like them at all. Think along the lines of those who were sowing those "$999 Thanksgiving / Christmas iMacs" rumors and the like.
First thing Thursday morning we had the rumor being sown that both Ingram and Pinacor were "out of stock" of the Rev. C iMacs. No stock available whatsoever. While that would be bullish for Apple and AAPL.O, what it implied would have been problematic for the remainder of the quarter. For the record, there is a "reserved stock" of lime, strawberry and tangerine at the distributors and a shortage of blueberry and grape. The distributors are not "out of stock." What this implies is that the distributors are awaiting the back ordered blueberry and grape flavors which are being pumped out the door at the iMac factories as fast as possible.
Second. For about an hour or so we had to run down the more pernicious rumor that was floated, and whose motivations we didn't like. But since it was being bandied about by more than one source we had to run it down. "Person(s) Unknown" had sown the false rumor that iMacs had been discontinued at CompUSA. That CompUSA was going to stop carrying iMacs. If true, it could have had severe consequences for the share prices of both CompUSA and Apple; especially the day prior to expiry. Never mind the long term implications. While it had the smell of being false, we had to run it down anyway.
And while this rumor was presented as having many possible explanations, like the imminent arrival of "new iMacs," whomsoever tried to spread this rumor had less than pure motives. Heck, why not attempt to profit from a downdraft in AAPL? Guess they had a load of 35 - 30 puts that were out of the money, or somesuch position. Thankfully, the sites who went off less than half-cocked with those rumors were ignored yesterday by the markets. Hopefully they will be ignored again today.
Third. We had the Best Buy (BBY.N) and the ever popular "production problem" rumors. These were the easiest to ignore as we already had the recon on hand to immediately dismiss them. The "Best Buy won" and "production problem" scenarios were less than smoke. They weren't even a light fog as far as we're concerned. Best Buy is the tail and not the dog. Outsourcing and iMac production is not the problem, demand is. For better or worse (for the recent period) Apple is trying to push iMacs out the door as fast as possible; with the emphasis on the demand for blueberry and grape flavors.
Once we ran everything down yesterday we saw what the motivations were of the people trying to get traction for those rumors. And we didn't like them one bit. They should be thankful that we didn't decide to make them squeal by beating them at their own game. Since we didn't want to play "Truth Patrol," we didn't publicly expose their efforts. If they keep trying post expiry, we just might. We've done it before when they've tried to play those games and we're ready to do it again.
Enough said.
For those who are emphatically stating that that Five Flavor iMacs have been discontinued or end-of-lifed, they are jumping to conclusions based on snippets of knowledge. Apple has placed in "reserve" inventories of strawberry, lime and tangerine iMacs at the distributors. CompUSA has reportedly placed a "D01" (discontinued) designation on the Five Flavored iMacs. Meanwhile, Apple is pumping out blueberry and grape iMacs from the "Hecho en Mexico" plant. Some resellers report that they have both blueberry and grape in stock and ready for delivery to whomsoever wants them. Does this sound more like Apple trying to balance inventory in the channel or discontinuing the Five Flavored iMacs? You tell us. We know what we think and what we have been told by many people.
What those who are authoritatively stating that iMacs are being discontinued are missing are some obvious points. Let's say that Apple has decided to discontinue the Five Flavors just 3 months after their introduction. That they are end-of-lifed and that Apple is going back to "just one color." Do you know what the pundits, critics and others would say? They would say that they were a "failure," no matter how many Apple sold. They would say that Apple's execution of the colored iMacs was unmanageable and that they had to abandon the color schemes. The analysts who were wringing their hands over the color popularity would be justified in their hand wringing. Never mind that it's a demand and not a supply problem. Those iMacs are selling like hot cakes. Apple has to balance the inventory.
Now, some of those asserting that the Five Flavor iMacs are end-of-lifed are now taking the position that the reason why they are being discontinued is that they are selling too well. Excuse us? Following that line of logic then Sony should have end-of-lifed the PlayStation in December '98. Following that line of logic then Apple should have discontinued the entire iMac line in the fall of '98. They should also end-of-lifed the Yosemite G3 boxes in March too.
Others point to the "Eight Ball" iMac model, black with a 17" screen, as the reason why they were end-of-lifed. We've got a question for you. If Apple is going to ship that model, what does it have written all over it? Consumer? Maybe. Business? Definitely. Why? Because more and more places are requiring, like California's OSHA, that 17" monitors are the minimum for business use. A 15" iMac is not standard and can't be deployed in a business environment. Now. When is Apple going to introduce its "Enterprise Solutions" that will be targeted at businesses? March? No. April? No. May? Bingo! And does that necessarily mean that Apple is going to discontinue its "color offerings?" Not necessarily. While they might offer colors in those rumored 17" Eight Balls, it doesn't mean that they are end-of-lifing the current inventory. That would be a stupid move.
"Yeah. We got '800,000' colored iMacs in inventory so we're going to introduce a better model so we'll have to hold a fire sale on them. Yeah. We know. We'll lose money on every sale but we'll make it up in volume!" Uh huh. CompUSA has been bundling iMacs, with not every color available at every store, but we don't think that it means they are end-of-lifed. We've been told they have not been.
And the only more stupid move is to try and convince consumers that they might as well not buy a computer that they would want to buy today because something else is coming soon that will be so much better. As we keep saying on this issue: These rumors can spread to the general populace and therefore stall Apple's sales, which impacts Apple's earnings, which impacts Apple's share price. We've gone into this all before. Which is why we made the decision not to publicly discuss upcoming hardware specs of Apple's new boxes as well as their ship dates. After a while, you'd want to hang us from the nearest tree.
If (as some reports indicate) CompUSA and other Apple Authorized Resellers are telling people that the current iMacs have been discontinued and have been end-of-lifed, we're certain that Apple will be none too pleased about this; as it could cause a stalling of iMac sales while customers await a "Fire Sale." As for Best Buy reportedly "dismantling" its iMac and Apple displays? Was Best Buy the one caught gray marketing iMacs? We don't know and we're not really desirous of finding out. We'll wait for the movie, if that's the case.
On Tuesday afternoon a letter from Apple to its resellers leaked out denying the rumors of discontinued Five Flavored iMacs, which vindicated our steadfast resistance to believe those rumors once we ran down the details. And we stand by our analysis from yesterday, which we hoped would have been the final word on this issue. As late as yesterday afternoon almost everyone was telling us that we were wrong. If everyone was going to jump off the George Washington Bridge we'd tell them to have a nice time and enjoy the swim, but we weren't going to go along.
We suspect that one of the major reasons Apple allowed, yes allowed, that letter to leak was to defuse it as an issue at today's shareholders meeting. The other main reason was to calm the channel down and allow them to calm down their customers who might have been voicing concerns over the discontinuation. The resellers who have Rev. C iMacs in stock wouldn't want to have to accept new iMacs (again) just three months after having to accept the Rev. C iMacs while they still had Rev. B iMacs in stock. Besides, it's Apple's stated goal to refresh the product line about every six months. Granted, the move from the Rev. A to the Rev. C was compressed into five months but we don't suspect that Apple would introduce a Rev. D iMac just eight months after the Rev. A hit the markets.
But not everyone was telling us that we were wrong. When we first started refusing to believe the rumors there were some who agreed with us. When some others read the analysis from yesterday they agreed with its reasoning. And we're not talking Apple employees, etc. We're talking from diverse areas.
What fueled these rumor reports were the reports that Best Buy (BBY.N) was out of stock of iMacs and that they had never received the five flavored iMacs. Not to mention that Best Buy was reportedly dismantling its Mac software displays. Of course, these reports fueled not only the rumors of the discontinuation rumors but also the speculation that it was Best Buy who gray marketed those iMacs to Costco and that Apple had pulled their reseller status. As we said, we'll wait for the official word from Apple on this. We'll wait for the movie. But there are reports that it wasn't Best Buy, so we'll have to wait for any announcements.
After we chased the rumors down, we took a step back and asked ourselves if the rumor reports passed the "Smell Test." In other words, in hindsight should we have placed any credence to them at all? Probably not. However, once we heard the rumor reports we had to chase the details down lest they were true and bit us in the backside at a later date. We hope that Apple's letter to its resellers answers these rumors once and for all; at least for the near term.
Finally. Neither MacWEEK nor News.com went anywhere near the rumors that Apple was discontinuing the Rev. C iMacs. Does that tell you anything about what those organizations thought about the rumor reports? Gee. We said the same thing about those Apple Branded Linux box rumors last December as well, didn't we? Enough said.