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Will Apple Be Forced to Build Cheap Computers?

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.