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  • Will Apple Be Forced to Build Cheap Computers?

    December 22nd, 2008

    You’ve heard it time and time again. Apple won’t enter the low-cost PC market because they don’t want to produce “junk.” Steve Jobs said that himself as recently as the last phone conference with financial analysts in October, when asked whether Apple planned to release a netbook.

    Since then things have changed in the marketplace, and these new facts can’t be lost on Apple.

    One of the few success stories in the consumer electronics world just happens to be the netbook, which is showing a roughly 160% sales improvement. Where the cheap note-book was once consigned to emerging countries, the current shaky economic climate has forced both consumers and businesses to embrace cheap gear.

    This means, for example, that discounters, such as Wal-Mart, are doing very well, whereas the higher-priced retailers are suffering.

    There are reports that Apple, which has traditionally played in the mid- to high-priced PC marketplace, has been forced to cut back on production because of reduced demand. Of course, until Apple actually reveals its financials for the current quarter — and that’s about a month away — the truth won’t be known.

    But you have to think they are watching developments real carefully, and they also have products in their test labs ready to deploy if the situation warrants it.

    Take the netbook. It may no longer be the “nascent” category described by Jobs, and thus you can safely expect Apple’s entry into the market perhaps as early as Macworld 2009. Even if the news comes from marketing VP Philip Schiller, it will still carry plenty of weight, and that’s not not intended as a bad pun. However, it seems doubtful that Apple will price these tiny note-books as cheaply as the major players in that business, such as Acer and Asus. Figure on something between $499 and $599, perhaps based on the iPod touch in terms of the internal workings.

    Indeed, an Apple netbook might surface as a “Pro” version of the touch or iPhone, with a bigger LCD display and sporting a traditional keyboard, although you can expect plenty of Apple elegance.

    There are also published reports claiming that the long-neglected Mac mini is in store for a major upgrade, perhaps with an even tinier form factor. Would it truly become the world’s smallest personal computer? Well, if Apple can pack in the guts of the latest generation of MacBooks, including NVIDIA’s terrific GeForce 9400M integrated graphics chip, you can bet this will be a great way to enjoy the Mac experience and not spend a whole lot of money.

    Now I don’t pretend to know what this thing might look like. It could simply carry the same form factor as it does now, though one photo I saw looks like a slightly thicker Time Capsule with a optical disc slot. Call that half a mini, so would it be a mini mini?

    Regardless, I would hope they would seriously consider making the thing relatively easy to upgrade without the need of specialized tools or putty knives and tiny, flexible fingers.

    In any case, the next question is pricing. Today’s cheapest Mac mini is $599, which is actually quite reasonable, and perhaps its successor would cost the same, with more powerful guts. On the other hand, Apple can certainly afford to deliver one for $499, since that was the original price for the mini, and I bet they’d fly off the shelves, assuming there’s also a decent ad campaign behind it.

    Despite the benign neglect, today’s Mac mini has a loyal audience among educators and small businesses, and they even serve duty as Web servers, though they’d probably have to be outfitted with speedier hard drives.

    One of my clients, Ken, switched from a Power Mac to the first-generation Mac mini shortly after it was introduced, and he just loves it. However, its hard drive failed recently, and he faced the question of whether to just upgrade to a newer model or fix the old one. In the end, the ongoing business slowdown convinced him to choose the latter, and he hopes to be able to stay put for another couple of years before he buys a replacement.

    Now before some of you suggest that Apple can’t get its collective heads around cheap gear, don’t forget that you can buy an iPod shuffle for $49. They certainly have the financial wherewithal, design expertise and negotiating power with suppliers to shave production expenses to the bone. Besides, I don’t think Wall Street or Apple’s stockholders would be terribly upset if they trimmed margins on their new hardware in order to build volume in a very difficult market situation.

    So there you have it. These are indeed my predictions for Apple’s major product introductions for the first part of 2009. Yes, maybe Snow Leopard will make its debut too, ahead of schedule, but right now job number one for Apple is to maintain growing Mac sales, and if it requires lower prices and more entry-level gear, they’re surely up to the task.



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    7 Responses to “Will Apple Be Forced to Build Cheap Computers?”

    1. hmurchison says:

      I read the flurry of posts about an Apple Netbook not because I don’t think Apple will make one (I do think they will) but because people don’t seem to grok the real issue that netbooks, and really every net device, tackles. This is simply dealing with people’s data. Netbooks are many things to many people. Some buy them for the price some buy them because they flat out need something that they can toss in a briefcase and still have room for everything else including the latest Grisham or Koontz novel.

      Netbooks aren’t some consolation for the weary poor. You “still” need to have an internet connection and at least a few applications.

      Apple’s Netbook will be different. I really don’t see Apple delivering a micro keyboard. Netbbook keyboards suck unless you’re 8 years old or a hunt and pecker. I can see them offering a QWERTY keyboard (hardware) as an option or included accessory as well as a virtual keyboard. I can see them offering enough touch features to quiet the iTablet crowd. Apple has yet to put their Inkwell technology to widespread use.

      Netbooks are inevitable and Apple knows this. I have little desire to game on a laptop and seeing as how the Macbook only has Ethernet and USB as the primary expansion ports Apple’s own designs support a narrow range of connectivity option a la a netbook.

      In Summary :

      In matters not which hardware you choose because the killer feature for consumers isn’t the form factor for computing devices it’s the data and the relative ease to which that data can be syncronized. The days where we things were so easily regimented into Desktop and Laptop strata are over. Today leveraging the internet means that I don’t have to carry around a laptop. I can easily have 50GB of Dropbox storage hanging off every network device I own ready to keep my data safe and synchronized. I have MobileMe for keeping ALL Net devices syncronized to my modifications down to the minute.

      Who cares what the form factor is? An iPhone meets the needs of a certain section of the public and so will a Netbook class device and a full sized laptop. There’s money to be made selling the hardware and selling the software. Apple is going to take MobilMe and turn it into a billion dollar web services platform and the easy way to tell this is by looking at the lack of Mac branding. It’s for everyone.

      Sell more hardware and sell more services and all will be fine.

    2. Will Apple Be Forced to Build Cheap Computers? | The Mac Night Owl says:

      […] unknown wrote an interesting post today onHere’s a quick excerptYou’ve heard it time and time again. Apple won’t enter the low-cost PC market because they don’t want to produce junk. Steve Jobs said that himself as. […]

    3. Karl says:

      I think a netbook is unlikely for Apple as I think it will take sales away from the iPhone. I do think that an updated MacMini at the same price point (or even $100 bucks less) is very likely. This keeps a semi-low cost Mac within reach of most potential consumers at a price point Apple seems to be comfortable with.

      People who shop solely on price usually shop on price during good times as well as bad times. And those people are exactly the people Apple doesn’t really want to go after because then they have to compete directly with other hardware manufactures on cost only.

      True, some potential customers my have a harder time justifying the cost for a MacMini now that the economy is tanking. But this is where Apple’s Marketing shines by persuading those people to buy a Mac. But the key here is that they were already “potential customers” who shop on value (versus shopping solely on price).

    4. David says:

      I find it funny and sad at the same time that Steve Jobs says Apple can’t make a sub-$500 computer that isn’t a piece of junk when the current Mac mini is, at best, a $399 computer. I’m simply amazed that a desktop machine filled with 2006-era notebook technology is a best seller on Amazon.

      I have low expectations for Macworld: replacement for the mini, iMacs with nVidia chipsets and LED backlighting, something on the software side.

      In the coming months we’ll see special events for the new Core i7 Xeon based Mac Pro and Snow Leopard. Hopefully we’ll also see the introduction of something to combat the netbook, most likely based on the iPod touch architecture. My personal preference is for a Message Pad like form factor: narrow enough for one hand, but tall enough to house a 16:9 ratio screen. Portrait orientation would be great for documents and websites while landscape would be the perfect shape for video.

      hmurchison thinks the future of data storage is the cloud, but speed or lack thereof, is the big issue there. I find it excruciatingly slow to upload even a few digital photos using my cable internet connection so most of my 20GB MobileMe storage sits empty.

      It continues to surprise me that the leader in digital downloads has no hardware designed to store and serve that content so I think a home server is the next new product category that Apple should tackle. Look at the average home. See all those DVDs sitting on a shelf? What happens when people switch to downloads? Today’s 1TB hard drives would be quickly overwhelmed by even the most modest video collections. Once everything switches to 1080p the storage demands will go through the roof. Some will argue that fiber optic internet and video on demand solves the problem, but there is plenty of evidence out there that most people prefer to “own” their content and not be forever renting it.

    5. hmurchison says:

      Dave

      A Network Storage device from Apple is long overdue. They actually have the same processor that many NAS devices use in the Time Capsule so it’s actually pretty beefy for storage needs. What they need is a Dobo like box that has 4 drive bays. That way a single drive could be your Time Machine backup and then you could pool the storage together for the remaining drives and serve media out to other macs, iPhone and Apple TV.

      The Apple TV should have no moving parts. It should have a SSD based buffer for queing video up and be based on a SoC design. It should sell for $149 at the base level and have features to Zone a home into sections.

      We’ve got to stop looking at low cost boxes as the end all be all of profit. My lady and I are thinking about jettisoning Comcast and moving to a Netflix/iTunes/OTA deal where we have DVD/Blu-ray coming through the mail with access to downloadable content via Netflix or iTunes on demand as well as getting local channels in HD off-the-air. Our monthly expenditure goes from say $40 a month not including Internet access to under $20 yet we still have all the access we need.

      Apple’s poised to make money from iTunes, the appstore and MobileMe but they need a critical mass of computers to enable these software and web services.

    6. MaX says:

      Here it is:

      Next Apple moves will be Books and Games…

      http://spidouz.wordpress.com/2008/09/03/next-apple-moves-will-be-books-and-games

      ROCKING!

    7. Coming soon to a Wal-Mart near you….

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