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  • So Where’s the Major Product Transition, Apple?

    October 15th, 2008

    All right, as we reach mid-October, I continue to wonder just what is Apple planning that will result in lower profit margins as a result of a major product transition?

    Or has it already arrived?

    That development was signaled during the last quarterly conference with financial analysts to discuss Apple’s earnings. It sure ignited the speculative flames, as both rumor sites and regular media outlets wondered just what Apple had under its corporate sleeves.

    Well, in September, the iPod line was refreshed in the typical fashion. More goodies for the same price, and a new/old form factor for the iPod nano. Certainly this will put Apple in good stead for the holiday season to sell tens of millions of iPods once again, even though sales increases are not quite what they used to be. But none of the changes can truly be characterized as major, nor would it seem that the prices are aggressive enough to hurt profits.

    That takes us to this week’s note-book refresh. Now in the scheme of things, I suppose Apple didn’t really have to do much. After all, MacBooks and MacBook Pros continue to deliver great sales figures, and, aside from some flashy colors on ugly old boxes from the PC box assemblers, there’s not much competition.

    So what did Apple do? Well, it was a mixed revision.

    At the low end, they simply continued building a variation of the older older model with either white or black plastics for $100 less, making them the first note-books from Apple to dip below the magic $1,000 barrier in several years. But it’s not as if the price changes are aggressive enough to substantially hurt profit margins, as the older parts used in these products are cheaper than they were when the MacBook line was last revised earlier this year.

    Now I suppose those precision aluminum unibody enclosures weren’t cheap to design, and it could be that the initial production ramp might prove to be extremely costly. Indeed, Apple has a penchant for expensive fabrication schemes, witness the complex plastic casings for the late, lamented Cube. So even though pricing for the new MacBook and MacBook Pro lines aren’t significantly different from their predecessors, I suppose that could hurt margins. The new NVIDIA graphics chips and the glass trackpad with embedded click button might also raise the price tag somewhat.

    So perhaps that’s it, folks! I suppose we’ll know when the inevitable tear-down occurs and an estimated bill of materials is published.

    Of course, some of the analysts don’t quite see it that way. I’m already hearing rumblings that Apple disappointed them because there was no $899 MacBook to compete with the cheap PC note-books. Perhaps they are still succumbing to the belief in the alleged “Apple tax,” the extra money you reportedly pay to own a computer with the Apple label on it.

    Perhaps they are just following the talking points of a certain misinformed Microsoft executive who ranted on about that subject in a recent interview published over at CNET, a site that’s always had difficulty giving Macs a fair shake. They really don’t deserve the extra hits, either, but I’m presenting the link anyway in case you want a point of reference.

    It’s worth noting in passing how the subject of that interview claimed that the Mac version of Office lacked an equivalent to Outlook, as if Entourage didn’t qualify. He needs to read the company’s spec sheets a little more carefully.

    He also referred to the Mac Pro, which lists for $2,799 in its standard configuration, as an example of an extremely overpriced computer. Now I suppose it is, when you look at those PC boxes listing for $399, complete with display. However, the Mac Pro isn’t strictly a personal computer; it’s a workstation. When you match it up with the equivalent product in Dell’s lineup, a Precision Workstation, identically equipped of course, the Mac comes out considerably and surprisingly cheaper.

    Indeed, when I did that before writing this article, the Dell, even with a $150 rebate, was still over $4,000. In Dell’s favor, they do offer a free 19-inch display, which is worth maybe $400. But that still leaves one huge price gap.

    In fact, Dell actually admitted to those differences at one time, although they never explained why, nor did they attempt to reduce the price of their product to match Apple’s.

    In any case, it’s a sure thing that the arguments about Apple’s prices won’t end here. There are many ways to spin that debate, and I’ve already weighed in on it far too often already.

    I just believe that, when it comes to the value equation, the Mac, or most any Apple product for that matter, generally comes out way ahead of the competition.



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