• The Apple/Intel Report: Are Cheaper Macs Coming?

    July 9th, 2005

    I find it difficult to believe that some supposedly well-connected columnists still routinely succumb to the belief that Macs are more expensive than Windows boxes. It underscores the fact that some people prefer to repeat what they’ve heard or been led to believe rather than check the facts for themselves. Since that’s what a journalist is supposed to do, where does that leave those columnists?

    But to repeat the obvious: Dell and other box builders sell stripped down PCs at bargain basement prices. But when you equip one of these boxes in the same fashion as a Mac, and that means checking off options that make it comparable feature-for-feature, as much as possible of course, the price difference vanishes. In many cases, the Mac comes out less expensive.

    Now you may argue that Apple’s laptops could be more affordable, and maybe the Power Mac ought to be cheaper, especially considering the fact that these professional desktops don’t sell so well these days. But the expensive Mac myth has outlived its usefulness.

    Unfortunately, that myth is now being employed to justify the claim that the switch to Intel processors will somehow make Macs cheaper. How so? Well, aren’t Intel chips less expensive than IBM’s? What about being able to use more industry standard components?

    These arguments are hard to justify, simply because none of these columnists really know what Apple pays for its processor chips. The terms of the deals with Freescale Semiconductor and IBM are not disclosed, nor are the deals that cover the other parts Apple buys for its computers. Now you may sometimes see published prices from these companies and from Intel, but those prices do not necessarily reflect what a computer maker really pays for those parts.

    If there is a price difference, I suspect it’s not all that great. But what about the other components Apple is using? Well, the hard drives and optical drives are the same ones available for PC users. The graphics chips are essentially the same, allowing for the differences in the PowerPC architecture, and many of the other components that are incorporated in your Mac are sourced from the same companies that supply PC makers.

    Now it is possible that Intel will also provide motherboards and other components to help reduce the cost of a Mac, and maybe, when all is said and done, the price might come down a tad. But there is still the cost of building those pretty cases, and the raw materials only amount to a portion of a company’s manufacturing costs. And not necessarily the biggest part. Consider the cost of assembly, packaging, shipping and marketing. Those are expenses that won’t change just because Apple can get a few parts cheaper.

    In the end, if a Mac becomes less expensive when it has Intel Inside, it won’t be by any significant degree.

    This isn’t to say that Apple can’t or shouldn’t reduce prices. Perhaps the only sure way to combat the perception that its computers are overpriced boutique products is to continue to aggressively drop prices where it can. In fact, it may well be the ideal time to drive prices down and sacrifice short-term profits, in part to make people who would otherwise put off buying a new Mac think twice about what they’re doing.

    Yes, all of us who use Macs want Apple Computer to live long and prosper. If you’re a stockholder, whether it’s one share or several thousand, you have a vested interest in the company’s success.

    In addition to cutting the prices of new Macs to overcome wrong ideas, Apple will have other challenges. One is benchmarking. After telling us for years that a PowerPC eats Pentiums for breakfast, it will be forced to play in the same sand box. Now that doesn’t mean those benchmarks were wrong. Despite the skepticism from some who believe Apple must be lying through its collective teeth, my personal experiences make it quite clear that these benchmarks are correct. The PC boxes aren’t being disabled somehow to make them fare worse. You just have to follow the methodology precisely, which also goes to show you that you could always derive tests that give one platform the advantage over the other.

    In any case, the switch to Intel will give Apple a new challenge, and that is to compare the efficiency of Mac OS X against Windows on the very same hardware. The theory goes that Windows is a bloated mess or at the very least more bloated than anything Apple might produce. That remains to be seen, and I’m going to be very curious to see how it all turns out.

    For now, let me just sum it all up. Macs aren’t necessarily more expensive than PC counterparts, and they won’t necessarily become cheaper when Apple switches to Intel chips. By the same token, a concerted campaign of price reductions may be necessary to goose sales in the months to come, and overcome those wrong perceptions once and for all.

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