SAN JOSE, Calif. - Apple’s ambition may be starting to get ahead of the company’s ability to achieve it.
Renowned in recent years for its operational excellence, Apple in the last two months has delayed two high-profile products, the Apple TV set-top box and now, it said Thursday, Leopard, the upcoming update to its OS X operating system. The company pushed back the release date of Leopard so it wouldn’t have to delay an even more highly anticipated product, the iPhone.
The problem Apple is running into is that it’s a relatively small company compared to tech giants such as Hewlett-Packard or IBM, said Van Baker, an analyst with research firm Gartner. As of last fall, Apple had about 18,000 full-time employees, compared to 156,000 for HP, according to the company’s annual reports.
“Clearly there’s evidence that they’re not executing to the same level they have in the past,” said Baker.
While Apple hasn’t been known for such delays, they’re not surprising, Baker said, noting that Apple is “broadening their product offering, and they have only so many engineering resources to go around.”
Apple said on Thursday that it was delaying Leopard, the fifth update of its OS X operating system, because it had to pull some of its engineering and quality assurance personnel from that project to help out with the iPhone. The much-hyped device, which Apple plans to release in June, will contain a new, slimmed-down version of the OS X operating system, which powers Apple’s Macintosh computers.
The move follows the delay in shipping Apple TV. The company originally planned to ship the new set-top box, which allows users to play movies and songs bought from iTunes through their living room entertainment centers, in February, but didn’t end up shipping the devices until mid-March.
By delaying Leopard in favor of the iPhone, Apple is obviously showing which product it thinks is more important. Given the hype around the iPhone and its potential, that’s not surprising. But it likely won’t come without a cost, a fact Apple acknowledged in its statement.
“Life often presents tradeoffs, and in this case we’re sure we’ve made the right ones,” the company said.
But by shifting resources to the iPhone away from Leopard, the company is favoring an unproven product that will compete in a very challenging industry, notes Richard Shim, an analyst with IDC, a market research firm.
The delay - and the reason behind it - are “a risk and a sign of how Apple is changing and diversifying,” said Shim. “It’s also a sign that they’ll have to be more careful with spreading themselves too thin.”
When Apple released Tiger, the last version of its operating system, two years ago, the program helped boost the company’s overall software sales by more than 50 percent. Analysts have been expecting similar results with Leopard, which promises a number of new features, including a new backup program called Time Machine and advanced 3-D animation features.
Now Apple will have to wait several months for those sales, which will now come after the end of its fiscal year in September. That could lead analysts to lower their sales and earnings estimates for the company this year - and potentially lead to a lower stock price.
Indeed, in after-hours trading following Apple’s announcement of the Leopard delay, the company’s stock fell $1.94, or 2.1 percent, to $90.25.
But the delay could have a wider affect for Apple, potentially hurting near-term sales of its Macintosh computers during the important back-to-school season.
Perhaps more importantly, the delay gives archrival Microsoft extra time to convince computer shoppers debating between the two that its new Windows Vista operating system is every bit as good as OS X.
“This might give Microsoft a one-up to get that consumer that doesn’t want to wait for Leopard,” said Baker.
The delay in Leopard and the earlier delay with Apple TV may serve as a reality check for investors and analysts who have been expecting big things from Apple. Indeed, many have been salivating at the thought that the iPhone or Apple TV may become as big a hit as the company’s iPods.
In recent years, investors have had little to reason to fear that the success of those products might be affected by Apple’s own operational problems.
Last year, for instance, the company rolled out its first-ever computers based on Intel’s processors some five months before it had promised them. And the company has updated its iPod lineup regularly, adding new models and completely revamping older ones.