The Mac Hardware Report: Apple and the Entry-Level PC

September 1st, 2006

As I expected, as soon as I disposed of the myth that Macs were more expensive than comparably-quipped PCs, a few readers tried to dispute my arguments. In the end, however, their claims were limited to saying that the PC was generally cheaper, so long as some of the features that were standard issue on the Macs were eliminated.

Of course, that changes the nature of beast, so to speak. Besides, I realize that you can buy a PC for less than $300, whereas the cheapest Mac mini is $599. But Apple isn’t playing in that sandbox. It’s a hotly competitive arena, and the companies who do produce the cheapest models aren’t making a whole lot of money on them.

Besides, they might lack the features you take for granted on today’s Macs, such as wireless networking, digital audio input and output, gigabit Ethernet. You want to add those features, you pay extra, and even if you have a free peripheral slot or two, they’ll fill up real fast with just the essentials. What do you do when you run out of expansion room, and there’s no USB-based alternative?

For a home or small business PC, the latter perhaps serving duty in a home office, having a great bundle included in the purchase price is a great idea. But what about the largest business where a remote control, Webcam, Wi-Fi and all the rest are unnecessary? Can they order a stripped version without these things from Apple, if not individually, in quantity?

The answer is, of course, no. Although there are lots of ways to configure your new Mac, and the choices are much more extensive on the Mac Pro, there are only so many features you can remove. The cheapest Mac mini is immutable in the sense of dropping a few things to get the price down.

So what happens if a company’s purchasing manager calls up an Apple rep and says they’d like to order a couple of thousand computers, but they don’t need the fluff? Would Apple say, yes, we’ll get on it right away, or just attempt to explain why these add-ons are essential? Or just say take it or leave it?

Alas, I suspect larger businesses, assuming you can even persuade them to go Mac, will just choose to leave it unless they can get some killer prices. Worse, I don’t think Apple is in to heavy discounting.

It raises the larger question, however, of whether Apple means to enter the business arena to a greater extent than they’ve done before. It hasn’t worked so far, and Apple, over the years, made enough marketing mistakes to fill a book or two. For all practical purposes, Windows countries that arena, and that isn’t going to change in the foreseeable future no matter how many “Get a Mac” ads Apple produces.

Whether Apple gains any traction at all depends on their business strategy, and they’re here to make a profit, not to cater to a marketplace that won’t yield a solid return on their investment. So if they decide they can’t make enough money on watered-down PCs, they simply won’t do it, even if they could make a killing in terms of volume.

What’s more, it’s not as if other PC makers are raking in profits at the low-end of the market. Even Dell is suffering somewhat these days, and they are the biggest box maker on the planet. Certainly competing on price alone isn’t always profitable. Apple only produced the Mac mini when they found a way to build them and get the proper rate of return.

On the other hand, I agree with some of you that a lot of people do not want or need some of the frills that are built into today’s Macs. But bombarding Apple with letters asking for fewer options isn’t going to deliver pay dirt. The only thing that will convince them to shed features on some models is a few solid promises of large orders. That’s the language everyone understands.

Right now, however, I don’t see it happening. Of course Apple has surprised me before, but they clearly have other priorities when it comes to this question. On the other hand, they once denied they’d ever produce a $500 Mac during a financial analysts’ meeting, and that was only three months before the original Mac mini debuted.

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15 Responses to “The Mac Hardware Report: Apple and the Entry-Level PC”

  1. Blackhill says:

    I find it paradoxical that what is “better” in the world of computers is measured by which is cheapest. I don’t know many people who say their Hyundai is better than a Lamborghini because it cost less or proudly tell all their friends they bought the cheapest house they could find. With most goods higher quality means a higher sticker price.

    When someone boasts, “I paid $300 for my PC,” I rely, “I’m sorry to hear that. You must be very upset that that’s all you could afford. Would you like to watch me work on my Mac?”

  2. mcloki says:

    I think you’re confusing cheap macs with de-contented macs. No one is suggesting they be deeply discounted. What most people want is that these de-contented machines be made available. Sell me a machine with no graphics card and no RAM. If I understand what I’m purchasing, Apple should give me the option to buy it. I’ll buy the stuff i need after market. Everyone talks about how much things cost. But I believe people are looking a how much the machines are worth to them. And to some people a Mac that is stripped down is worth purchasing, cost notwithstanding. How large a market would there for Apple if they were just to sell their motherboards that had the OS on 8 gigs of Flash Ram or a small hard drive, Firewire ports, hard drive ports, a few PCI slots, USB ports and sockets for, but no Intel chips. I think they would sell plenty of these motherboards. But after careful consideration and adding up the cost most high end users would go with Apple because Apple will have cost efficiencies and buying power on their side.

  3. JKB says:

    Someone please explain to me the business case for Apple to sell hobby kits. Dell and other box producers I can see but Apple sells an experience. The experience is an integration of hardware and software. There are after market add-ons (software) but Apple has been tireless in working to ensure the add-ons don’t detract from the experience. How does allowing non-compliant systems enhance the brand?

    Apple has been progressing the the computer from a hobby to an appliance. An intelligent and enhance-able appliance to be sure, but in the end it is a tool. That is why just working has been a priority in their development. When using your Mac, are you actually aware of the computer? I doubt it with a Mac you are browsing the web or reading/sending email or chatting, even video chatting. The Mac is simply a tool to do these things. When I’m using my Wintel at work, I am frequently forced to drop out of my train of thought to deal with some “computer” issue. Apple has been slowly leading users to a new paradigm. There will always be cheap computers, the trade off is in the experience. Think of it this way, you can have a piece of perfectly good generic chocolate or you can experience a piece of Belgian chocolate. Both satisfy your need for the taste of chocolate but one provides you with an experience to remember after you’ve swallowed.

    You can buy a $300 computer to use or you can experience a Mac for a bit more.

  4. Richard Taylor says:

    Macs are sold to people who buy computers, not corporations who buy workstations. To sell to corporate, Apple will have to change its methods, and that means changing the product, perhaps even commoditizing it. Hasn’t that already started with the new Mac Pro? You can get it in eleventy-seventy different BTOs.

    A brief aside, if Apple were to sell its OS to OEMs at a price consistent with its quality — say several hundred dollars or more — then competing head to head with bargain box makers would generate more profits from an area Apple chooses not to compete in, and continue to provide a reason for the rest of us to buy Apple hardware.

    Or maybe I’m smoking something funny, I don’t know.

  5. mcloki says:

    “Someone please explain to me the business case for Apple to sell hobby kits” I don’t really see any of the machines people buy as hobby kits. Not all people have the same needs as everyone else. At the lowest level of user (my mom for example.) All she wants to do is surf the web and look at photos of her grandchildren. Even a mini is overkill. Bluetooth? Airport? A bit much. But the business case is simple. She can use the services of .Mac. She doesn’t need a big hard drive when she can store all of her photos on .Mac. That recurring service makes her mini more valuable to Apple because she is using a service, An annual prepaid service. There’s the business case.
    As far as the motherboards go, only sell them with a full retail version of OSX and iLife. People will still buy them.

  6. -hh says:

    For another automotive analogy,

    We used to be able to buy automobiles from GM and the like with either crank or power windows. Today, many automakers don’t even offer anything other than power windows on many models becuase it helps them cut costs on the product: its cheaper for them to offer just the slightly higher-end product than to design, build and stock two instances…and that’s why crank windows have disappeared from many automobiles today.

    The same holds true for PC’s: managing inventory on permutations can be a black hole for costs, and while some are still worth doing, the lower cost ones are not economically feasible. That’s why certain things get “undeletably” bundled.

    FWIW, if we go back into the 1960’s, some domestic automobiles could be special-ordered even without tires & rims! Yes, you actually had to bring your own wheels to the dealership to drive it off the lot. If this sounds absolutely silly to you, ask yourself again why you’re asking a PC company to similarly “decontent” their product into an ‘undrivable’ condition?


  7. Cooner says:

    I’d have to say that whether or not Apple should sell stripped-down models or “hobby kit” models of computers is an interesting question … but not one with an obvious answer. It’s tempting to just say, “Of course they should! They’re losing out on a whole class of customers when they could be vastly increasing their market share!” But it may not be that simple.

    Depends on the business model Apple chooses to pursue. Traditionally Apple has gone for higher-end customers willing to pay a premium for their product. Recently this has reduced a bit … as outlined earlier, Macs aren’t significantly more expensive than an equally-outfitted Wintel machine … but they still sell premium computers they can collect a healthy profit margin on. Sure, they don’t have any ultra-cheap models to sell as workstations to large businesses or to grandma to check her email at home … but those systems don’t have a wide profit margin (and in many cases probably generate more customer service calls than they’re worth.)

    Sure, it seems in some respect overkill to have a video camera and Bluetooth and wireless stock on every laptop. But then, as someone suggested above … some parts are so cheap, it may be worth it for Apple to include them on all laptops just so they don’t have to worry about managing different parts for each model (does this case have a hole for the camera or not?) or having to maintain multiple models in inventory with all the different options. (Anyone remember trying to order a Mac in the early 90s, trying to choose between the dozens of models of Performa, Centris, Quadra, LC, etc.?)

    As for selling stripped-down, user-expandible Macs … a bit part of Apple’s sales pitch is that Macs “just work;” the reason they work is because of the tight integration between the OS and the limited range of hardware options available. If they start letting customers try slapping in any additional hardware they want, the equation becomes a lot messier.

    Really, when it comes down to it, everything is a risk-reward-probability measure. Would Apple be able to sell low-end machines in enough quantity to make up for the slimmer profit margin? Or, there might some customers who would start out with a low-end machine, and then upgrade to a more expensive Mac later on … but really, how many? and would it likely be enough to be worth the risks? And so on, and so on. There’s plenty of customers who would no doubt LIKE to see cheaper or more built-to-order Macs … but ultimately, it’s Apple’s decision to balance out what the best course of action is for their bottom line.

    Just my $.02 🙂

  8. Andrew says:

    Apple doesn’t need to compete in every area, but by not doing so makes it impossible to compare prices in segments they do not compete in. You cannot say that Macs are not more expensive than PCs when there are no low-end Macs. High end Macs are if anything cheaper than high end PCs right now, and the mid range is about the same price. But it is definitely not true to say that there is not a significant price premium to get into a Mac compared to a PC. It is precisely grandma with her email and the office computer where that price difference is in the PC’s favor, and unless Apple enters that market, it will remain so.

    Last week I showed how my $300 Compaq compares with the $600 Mac Mini, and unlike the typical price-comparison where the PC gets lots of expensive stuff added to make it comparable, I looked at the computer for its intended use. The funny thing was that the $600 Mini, if you wanted to compare feature by feature and make them equal, would need just as many add-ons as the Compaq would to be comparable, and even then, both had gaps that no add-on could cure (remote for the Compaq and PCI slots, desktop hard/optical drives and the ability to upgrade video for the Mini). Apple doesn’t have a low end computer, they have the Mini, which is low end in spec, but actually an expensive computer for its capabilities.

    I like the Mini, a lot, and already have the G4 version at my office and will get the high-end version for my home in the not too distant future (waiting for the next speed/feature/price adjustment). While it doesn’t come close to a cheap PC in value, it is very stylish, silent and of course runs OS X. The only thing that could make me buy something else is if Apple offered the education iMac, which I would buy instead, so I could reuse the 19″ LCD monitor I have at home now. In fact, features and performance are so low on the priority list that I wasn’t planning a new home computer at all, until last week when my 7-year-old Power Mac G4 in that role started makeing very loud and strange noises that at this point in its life are just not worth identifying and repairing.

  9. In fact, features and performance are so low on the priority list that I wasn’t planning a new home computer at all, until last week when my 7-year-old Power Mac G4 in that role started makeing very loud and strange noises that at this point in its life are just not worth identifying and repairing.

    On the other hand, it could be a bad hard drive, which can make some disturbing clicking noises when it’s in about-to-fail mode.


  10. Andrew says:

    No, not the drive. I think its the fan or power supply. I have two drives in there and both are nice and quiet.

  11. No, not the drive. I think its the fan or power supply. I have two drives in there and both are nice and quiet.

    Probably not super-expensive to repair, but definitely not worth it at this stage, unless you can get the parts real cheap.

    Ah, our disposable society. I have a fairly expensive VCR, about 8 or 9 years old, that will probably require a repair that is expensive enough to consign that device to the recycling plant, wherever that is.


  12. Andrew says:

    Yeah, I hate that. I had to toss a very high-end video camera and an S-VHS 4-head VCR a few years back that were about 7-years-old, very capable and loaded with cool features, only they stopped working.

    I just threw away a Lombard PowerBook that was otherwise perfect except that it just completely stopped working, and when I pulled my old 3400c from the closet found that it too was totally dead. I tried all of the resurrection tricks, but these things had just simply expired from old age.

  13. but these things had just simply expired from old age.

    Yeah, don’t me remind me about old age 🙂


  14. Bill says:

    There is no business model, from Apple’s point of view, in selling stripped machines.

    If you want a build-to-order machine Apple’s decided you need to pony up for the MacPro.

    If you need a G4 tower, there are plenty available on ebay.

    I bought a Gigabit Ethernet tower for $75 to replace an aging iMac G3.

  15. John Rizzo says:

    Speaking of hardware, looks like Apple has some problems with MacBooks. The symptom is the MacBook randomly shuts down, many times a day. It seems batteries are overheating causing damage to the motherboards, or maybe a motherboard problem is damaging the batter. In either case, Apple is replacing motherboards and batteries.

    The BBC posted some gruesome photos here in July:

    There are reports all over the ‘net. I have some here:

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