The iMac Attack and the Apple Software Salvo

However, before Apple CEO Steve Jobs even got into the meat of the announcement, he boasted -- in his low-key style -- that the Apple Mac has seen three times the year-over-year growth as the rest of the PC industry in the last four quarters.

"The Mac has had a very successful last year and has a tremendous amount of momentum ... clearly growing this much faster than the industry, it's picking up market share," Jobs noted.

What is this usually secretive company up to now? Will the new iMacs help Apple continue to increase sales at rates three times faster than the competition? Will iWork '08 outflank the current market-dominating Microsoft (Nasdaq: MSFT) Office?

Back to School

The new iMac lineup ditches the 17-inch model and replaces it with a 20-inch model so that all iMacs are now either in the 20-inch or 24-inch screen size form factor. In addition to the usual processor speed boosts, Apple is now offering relatively greater processing power and screen size at the same price points of previous iMacs. Starting at US$1,199, consumers can get into an entry-level model 2.0 GHz, 20-inch iMac or shell out $2,299 for a 2.8 GHz 24-inch model.

All new iMacs are redesigned with sleek aluminum and glass, and they come with a super-slim keyboard.

"With this latest announcement, I see it as a back-to-school placeholder until they bring out Leopard. They needed something to remind people they had product for the back-to-school buying ramp, and Leopard's delay caused them to miss that with their big push," Rob Enderle, principal analyst for the Enderle Group, told MacNewsWorld.

Leopard is Apple's next-generation operating system, which was delayed this spring while the company focused efforts on its iPhone.

"Now that push will be in the October time frame and done for the holidays -- I think we should see a more powerful offer then," Enderle noted.

"Ideally, the new hardware and the new OS, with enhanced applications , should have come at the same time, but the hardware and applications were done early, which kind of hosed the announcement. I expect they have held some of the more interesting stuff back to make sure they can make a much bigger deal in October," he added.

Back to the Office

While Apple announced the new iMacs in time for school, Jobs didn't say much about back-to-school sales. In fact, he went in the opposite direction.

"The iMac has been really successful for us. We'd like to make it even better," he said. "So how might we go about doing that?"

The answer, he said, was aluminum and glass, which are the same materials the company used to produce its high-end iPhone.

"We build our most professional products out of aluminum ... professionals love our pro products made out of aluminum," Jobs explained. "Glass is very elegant. Again, you normally see it on much higher-end products."

Part of Apple's strategy has always been about elegant design, and the new iMacs are reflecting that effort -- this time, with a nod to the pros.

Not Leaving the Living Room

Apple's iLife '08, however, is aimed squarely at consumers. It ships free with the new iMacs and retails for $79 for existing Mac users.

iLife '08 contains a major new version of Apple's integrated photo cataloging application, iPhoto, and a completely reinvented iMovie, both of which integrate seamlessly with a new online .Mac Web Gallery. Apple's .Mac is an online e-mail , storage, blogging, backup and Web publishing service, available as a separate yearly subscription. iLife also comes with iWeb '08 and GarageBand '08, both of which are consumer-friendly applications.

While exciting and more powerful in its own right, iLife '08 represents business-as-usual for Apple -- it's an easy-to-use photo, video, music and media storage, display, creation and manipulation suite. Consumers who want iLife will continue to buy Macs -- it's part of the straightforward value proposition that helps Apple get away with charging higher acquisition prices for its hardware.

The Numbers Wild Card

Perhaps the most interesting competitive move debuted by Apple last week was the inclusion of Numbers in iWork '08. Numbers is the long-rumored spreadsheet application, and it finally rounds out iWork as a full-featured office application suite. Numbers joins Pages, which is a page-design and word processing application, along with Keynote, which is a presentation application similar to Microsoft's PowerPoint.

Differentiators for Pages and Keynote are the ease in which non-pros can create beautiful documents and presentations, using photos integrated from iPhoto.

Microsoft, of course, dominates the office application suite space with its Microsoft Office product line, both on an enterprise as well as a consumer level. Can Apple hope to compete against Microsoft? Microsoft also offers Microsoft Office 2004 for Mac, so can Apple even compete on its own OS X-based turf?

"Apple is trying to build a complete platform so that all of the core technology ... they own. This will allow them to make more rapid advancements on the OS side and not share them far in advance with key partners -- like Microsoft -- which can either breach their fanatic level of secrecy or slow down the move," Enderle explained. For instance, the upcoming version of Office for the Mac was significantly slowed by Apple's decision not to give Microsoft an early heads-up on the Intel (Nasdaq: INTC) move.

Microsoft's next version of Office for the Mac will be Microsoft Office 2008 for Mac, and its release has been delayed to January 2008, missing out on the holiday buying season.

Barely 1 Percent

Still, "from the data that we're seeing, the vast majority of Mac users prefer Microsoft Office for Mac," Chris Swenson, NPG Group director of software industry analysis, told MacNewsWorld.

Microsoft's sales volume gives the company little reason to worry, according to the NPG Group. Previous versions of iWork have only captured about 1 percent of the office suite market in terms of dollar share in the U.S.

Just the Mac Market

In relation to Mac-against-Mac office sales, iWork is doing better, but still lags by a long shot.

"For the first six months of this year, the dollar volume share was 90.8 percent for Microsoft and 9.2 percent for Apple," Swenson said, noting that the average selling price for Microsoft Office 2004 for Mac is $161.08 while the average selling price for iWork is $75.59.

Despite the higher price, Microsoft has still been able to capture the lion's share of unit sales, too. Microsoft picks up 82.3 percent of the units sold in the U.S. while Apple snags the remaining 17.7 percent.

"That's still good -- that's decent share for Apple in an entrenched market, and that's before the introduction of Numbers," Swenson noted. "I think the sales will go up. Apple has a little breathing room until Microsoft comes out with Office 2008, and I think Apple will have decent sales during the holidays."

A Larger Factor

Swenson attributes the success of Microsoft Office for Mac to the fact that Microsoft dominates the office suite landscape in the PC world at large. Consumers, even if they are die-hard Mac users, often work with others who use PCs and Microsoft Office.

However, the job aspect may be an even larger factor.

"The work component is key, because granted, I can view my e-mail through my company's Exchange server through the Web. I can use a Web browser, but Entourage also gives me the ability to view and respond to e-mail meeting invitations through my rich client Entourage -- and it uses the same technology as Outlook Web access to tunnel through the firewall. It's just phenomenal," Swenson explained.

"If you're in an office environment , a lot of people will opt to Office," he added.

What About Switchers?

"The other thing to note is the Mac version of MS Office has been selling like hot cakes. From 2001 to 2006, the compound annual growth rate was 72.8 percent on the Mac. For Windows versions of Office, it was 17.8 percent," Swenson said.

"That's not just a factor of more people switching to the Mac, it's a factor of, 'Hey, if I switch to the Mac, I have to buy a productivity suite now.' Windows users had the luxury of using an older version of Office when they bought a new PC. Even if Microsoft loses an OS sale, they are keeping the Office sale. It's not necessarily a net negative for Microsoft," he explained.

"So much has shifted to centralized applications over the years, there are actually a large number of people who don't really need the full power of Excel anymore," Enderle said.

"Some still need it for expense reports and light financial planning and have custom templates -- it's those custom templates that will likely be a problem. But much of this has either moved to the Web, or is moving, and once it moves, you don't need that capability in a suite anymore," he added.

A lighter-weight iWork-based Numbers spreadsheet, then, might work fine for more and more business workers.

The Shadow of Google

Google's (Nasdaq: GOOG) online Web-based applications, Google Docs and Spreadsheets, cast a shadow on both iWork '08 and Microsoft Office. The Google solutions are free, accessible from most any Web browsers, compatible with Microsoft Office documents, and easily sharable with friends, family and coworkers. Plus, as more enterprise-grade software becomes Web-service based, enterprises might shift to Google Apps as a way of dealing with cross-platform compatibility issues -- even if the enterprise has to pay for a pro-grade service.

iWork '08 is well-positioned recapture previous iWork users who found the solution lacking -- especially now that it includes Numbers and an optional word processing-focused text entry mode. As for Microsoft Office 2008 for Mac? It will likely sell well too.