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  • We Return to the Cheap Mac Equation

    October 28th, 2009

    Although it was widely expected that Apple would introduce a cheaper MacBook this year, they chose otherwise. Since there will be no new products in 2009 from Apple, based on their own statements, this issue is closed, unless they have reason to change things in 2010 or beyond.

    However, you can’t ignore the fact that an awful lot of people out there consider Apple’s products overpriced or at least premium priced. This is the mantra repeated regularly by Microsoft and its sycophants, and even the mainstream media says pretty much the same thing.

    Apple only has itself to blame for these perceptions, because for so many years their gear was priced considerably higher than comparable products. It surely helped enhance the bottom line, but this high profit business plan surely didn’t help Apple’s market share.

    These days, Apple still gets great profits, but not from overly high price points. Instead, it comes from smart management of the acquisition of raw materials and tight inventories. In other words, they control wasteful spending in virtually every department.

    At the same time, the prices of Apple gear remain highly competitive, far more so than you might imagine. By picking and choosing which markets and segments to enter, they don’t overwhelm themselves with confusing product variations, and the customers aren’t so confused about which models to buy. Just about everything is clearly defined. Sure Macs come with the ability to customize, but the choices are starkly limited.

    This, of course, is one key reason why Apple also gets a bad rap when it comes to being competitive, particularly in the PC arena, where there are so many different versions and subversions of a particular model, the mind boggles. If there is a nook or a cranny to fill, you can bet Dell, HP or one of the other PC box makers will attempt to fill it, even if there’s little money to be made.

    This explains, for example, why so many PC makers jumped headlong into the netbook mess. Yes, a whole lot of them are being sold, but it’s an open question whether such miniature note-books are going to be long-term successes, or just vanish when customers have enough money to buy something really useful. It’s too early in the game, but it’s a sure thing that there’s not a lot of profit in a $300 computer of any size, even if it’s a desktop model.

    So when Apple is asked about building a cheap Mac, they respond saying they don’t know how to build something inexpensive that wouldn’t wind up being a piece of junk. Surely they have the PC industry as a whole to present an example they don’t want to follow.

    Unfortunately, far too many members of the tech and financial media feel they are smart enough to exhort Apple to build this, that, or the other thing. If other companies are doing it, why not Apple? They have to be missing out on huge market share gains, or at least they can prevent lost sales if customers go elsewhere for the product they still refuse to build.

    People who believe in such things seem to forget that one of the reasons for Apple’s great success, despite the economic situation, is because they pick and choose carefully which products to make, and what to ignore. There may indeed be a tablet computer at some point in time, for example, but only if Apple thinks they can make a difference and make a profit. If the product doesn’t deliver on both, it won’t be built, or if it is, it’ll be discontinued.

    Consider the Cube. It looked great. It set a standard for style, and I recall writing at the time that it belonged in a museum. Well, that’s probably where it ended up, as a gadget that was mostly style, little substance, and priced too high to sell a sufficient number of units to keep it going. Based on a comment Steve Jobs made to the media during the Mac OS X rollout in early 2001, during which he denied that the Cube would be discontinued, those of us in the audience got the feeling that he had a personal commitment to its success. But a few weeks later, the Cube left Apple’s product sheets, because the hard numbers demonstrated it would not live long and prosper.

    This doesn’t mean that there can’t or won’t be a cheaper Mac. Certainly dropping the price of the MacBook Pro demonstrates that, if necessary, Apple can shave profits a little when it’s necessary, and in that case, they probably made up a lot of the difference by selling more of them.

    Now what a future Apple leadership might do is anyone’s guess, but it’s clear the current executive team — with or without Steve Jobs — won’t be building those cheap computers anytime soon. Yes, there are inexpensive iPods and the iPhone is priced right there with its smartphone competition. But when it comes to personal computers, Apple has staked out a territory where they can be exceedingly prosperous and grow the market at Microsoft’s expense. They have no reason to change their strategy.



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