Today: While Amazon was showing off its new iPhone rival, Apple introduced a low-end iMac with a smaller price tag. Also: Adobe shows off new apps and more after strong earnings report, stock spikes.
The Lead: Apple offers a cheaper iMac, Amazon offers a phone
As Amazon prepared to introduce its iPhone rival Wednesday morning, Apple was focused on shoring up its sales of personal computers by introducing a new, lower-priced iMac.
The Cupertino company introduced a new iMac with a price tag starting at $1,099, $200 cheaper than the previous cheapest iMac, an all-in-one personal computer that helped Apple's then-sagging fortunes even before the mobile revolution sparked the company's current dominance. The trade-off comes in performance: The "entry level" iMac comes with a slower processor, half the hard-drive storage and lesser graphics power than previous low-end Apple PCs.
Apple CEO Tim Cook has derided critics who say Apple should produce more products at lower price points to capture more market share, famously saying, "We're not in the junk business."
While Apple has maintained record profits with only high-end devices, its PC sales have been slipping along with the rest of the industry. In its 2013 fiscal year, Apple reported a 10 percent decline in Mac unit sales to 16.3 million, with revenues from those sales falling 7 percent to $21.5 billion. In the first six months of its current fiscal year, Apple's Mac sales seem to be recovering a bit, with unit sales rising 12 percent and revenues gaining 9 percent.
The iPhone is far more important to Apple's financial success than Macs -- producing sales of $91.3 billion in fiscal 2013 and $58.6 billion in the first six months of 2014 -- and Amazon looked to capture a piece of that market with the introduction of its first smartphone Wednesday. The Washington e-commerce titan showed off the Fire phone in Seattle, with founder and CEO Jeff Bezos praising the phone's ability to render images in 3D and deep integration with Amazon's online marketplace.
Surprisingly, Amazon did not attempt to undercut Apple on price, as it did with its Kindle Fire line of tablets. The Fire phone will start at $649, or $199 with a contract, and is exclusively available through only one wireless carrier, AT&T, a move Apple made in the early days of the iPhone but has since abandoned.
Even with the lower price point of its tablet offering, Amazon has barely taken a chunk out of Apple's sales, with the company's total shipments and market shares actually decreasing in the all-important holiday-shopping quarter last year, according to IDC. With Apple's iPhone even more dominant in the smartphone space than the iPad is for tablets, analysts said Amazon has a long road ahead of it to become a true Apple rival.
"Just surviving, let alone prospering, in the mobile handset business will take a multiyear commitment on the order of Amazon's investments in public cloud infrastructure through its Amazon Web Services unit," Forrester Research analyst Julie Ask told Bloomberg News.
Apple stock gained 0.1 percent to $92.18 Wednesday, while Amazon shares increased 2.7 percent to $334.38.
SV150 market report: Adobe hits record highs as Wall Street gains
Wall Street gained along with Apple and Amazon, as continued reductions in bond purchases by the Federal Reserve did not weigh on stocks and Adobe roared higher while showing off new offerings.
Adobe stock reached all-time highs Wednesday, gaining 8.2 percent to $73.08 after announcing strong earnings Tuesday afternoon and showing off the next wave of its Creative Cloud software and mobile apps Wednesday morning. The San Jose software company's transition to a software-as-a-service, or cloud, model continued to pay off in its most recent quarter, with revenues rising year-over-year for the first time in five quarters and subscriber growth surpassing expectations. The growth could continue with Adobe's new wave of Creative Cloud offerings, which include a free Photoshop app for Apple mobile gadgets, updates to its core desktop products such as Illustrator and InDesign, and even hardware -- a pen and ruler set for the iPad called Ink and Slide is now available.
Intel dropped 0.1 percent to $29.93 after announcing that it would begin offering customizable chips, which should help the Santa Clara chipmaker keep large customers such as Google and Facebook on board. Facebook added 1.9 percent to $65.60 while disrupting an industry far from social media, offering open-source plans for a networking switch along with software to help it work. Google added 1.8 percent to $560.66 despite concerns that the latest blockade of its service in China could be a long-term issue, and LinkedIn added 2.3 percent to $169.25 despite reports of a security flaw. Yahoo followed Google and LinkedIn by releasing its workforce demographics, and the company's stock gained 1.4 percent to $34.94. SolarCity continued its hot streak after Tuesday's acquisition announcement, with the San Mateo solar installer increasing 4.1 percent to $67.15, but fellow Elon Musk-helmed company Tesla Motors couldn't maintain its momentum from Tuesday, falling 2 percent to $227.12.
Up: Adobe, SolarCity, Yelp, Splunk, LinkedIn, NetApp, Twitter, Facebook, Google, Workday, Yahoo, eBay, Oracle, Netflix, Symantec, Pandora, EA
Down: Tesla, AMD, SanDisk, Zynga, Hewlett-Packard, Applied Materials, Gilead, Salesforce, Nvidia, Intel
The SV150 index of Silicon Valley's largest tech companies: Up 9.64, or 0.65 percent, to 1,500.48
The tech-heavy Nasdaq composite index: Up 25.6, or 0.59 percent, to 4,362.84
The blue chip Dow Jones industrial average: Up 98.13, or 0.58 percent, to 16,906.62
And the widely watched Standard & Poor's 500 index: Up 14.99, or 0.77 percent, to 1,956.98