Apple Computer Inc. is looking to attract new customers and increase sales in Hawai'i with a second company-owned retail store at an O'ahu shopping center.

The maker of the Macintosh computer and iPod audio player, which opened its first local Apple Store at Ala Moana Center three years ago, is negotiating for space at Kahala Mall that could become another retail outlet for Apple by the end of the year.

Ron Yoda, Kahala Mall general manager, confirmed "ongoing" talks with Apple for store space, but said no lease has been signed.

An Apple official at the company's California headquarters could not be reached for comment yesterday, though the company previously has been secretive about plans for new stores.

Apple launched its line of company-owned retail stores in 2001, and has steadily expanded the chain to about 150 stores in roughly 30 states.

New stores often have drawn hundreds of Mac enthusiasts interested in the latest Apple products, demonstrations and merchandise giveaways at store grand openings.

Apple also has used its stores predominantly at high-traffic mall locations to attract new customers who aren't familiar with Apple systems.

The retail effort has been a lucrative one for the company, which has increased annual average per-store sales from $11.5 million in 2003 to $22.4 million last year, according to financial reports filed by publicly traded Apple.

Eugene Villaluz, a Mac enthusiast who operates the Internet site development and service business Tapa Communications, said that the Ala Moana Apple Store is small compared with others on the Mainland, and that a Kahala location would be more convenient for him as an Apple customer living in Kaimuki.

Independent businesses selling Apple products and services in Hawai'i said Apple's retail foray has hurt business, though the broader long-term effect may be more mixed.

Mike Palcic, vice president of the MacMouse Club store in Kaka'ako, said the Ala Moana Apple Store initially reduced sales for MacMouse, which has since focused more on servicing Apple products and dealing in later-generation merchandise not found in the Apple Store.

"We see (the Apple Store) as an asset because it puts more Macs in the market," he said. "Anytime Apple can grow their market share, it's good for us."

Betty Markowski, owner of Mac Made Easy in Kailua, said she has also had to shift her business in response to Apple's expanding retail ambition.

"They have been going after my customers aggressively," she said. "We're still doing retail, but it's tough."

Markowski, who worked for Apple before opening Mac Made Easy in 1992 in Honolulu, said she responded to the changing retail landscape by starting an O'ahu-wide mobile repair service in March.

Mac Made Easy also closed a Nu'uanu store in March, after opening the smaller Kailua shop in November. Markowski said the Nu'uanu store was too big and wasn't in the best neighborhood, but word of the planned Kahala Mall Apple Store also contributed to her decision to close the store.

"We're trying to find our niche," she said.

"We'll just have to see how it goes."

Reach Andrew Gomes at agomes@honoluluadvertiser.com.