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  • Does Apple Build the Gear You Want?

    November 30th, 2009

    A big part of the recent debate over Apple pricing and that alleged Apple Tax is whether Apple is forcing you to pay for loads of options that you don’t want. This is certainly the most significant argument about the whole issue, because even if a comparably equipped Mac and PC are similar in price, it doesn’t matter if Apple isn’t building the computer that best suits your personal requirements.

    This is one of the reasons why I suggested a possible business configuration. Now it’s clear to me that it’s far cheaper for Apple to supply Bluetooth and Wi-Fi preinstalled on the logic boards, and the extra money you pay is probably not a large figure. If you had to buy specialty daughter cards to get these features, Apple would have to design and test separate components along with an interface that allowed them to connect properly. It would mean that the majority of people who want one or both would end up paying more for their new Macs.

    That’s a critical point. Despite the erroneous claims in a recent issue of Consumer Reports that Apple’s new iMacs delivered more without a “hefty” price increase, Apple generally keeps the price the same or delivers higher-end configurations for less when they upgrade products. Bundling everything as standard equipment reduces their production costs, and thus the retail price if Apple chooses to pass on those savings to you.

    So in constructing that business-oriented Mac, I’d leave in the wireless networking. Then again, if you include the MacBook, MacBook Pro and iMac, all of which have built-in Web cams as well, eliminating all three might indeed produce a slight savings, which I estimate to be $50 to $75 per unit. That may mean very little if you’re buying just one, but when you order up hundreds or thousands of Macs similarly configured, pretty soon it adds up.

    However, I think most of you realize that Apple has not invested much time or energy devising an enterprise strategy. Instead, they expect businesses to simply use the same Macs that are sold to consumers. In large part, they’ve been successful, because more and more businesses have at least some Macs around the office. Indeed, there appears to be less resistance on the part of IT people who traditionally favored Windows. But I suspect part of that is due to the fact that corporate executives end up buying new Macs and then telling the systems people that they just have to accept the situation and deal with it. It’s also true that Apple has made it easier and easier to integrate Macs into Windows networks with each Mac OS X upgrade.

    The other question is more serious in its implications. Does Apple provide the products you, as a consumer, want to buy, or are you compromising big time to go Mac? This is the real issue raised by that Apple Tax claim, because Apple sells fully loaded personal computers, brimming with the latest and greatest technology. The average sales price is way above that of the average PC. Indeed, roughly 50% of the money spent on personal computers in the U.S. retail market goes to Apple. But their actual market share is still between eight and nine percent overall in this country.

    This doesn’t mean Apple is building overpriced gear. They have opted to pick and choose the market segments in which they operate, avoiding the cheap PC playground, where bottom feeders fight relentlessly for higher and higher sales, profit margins be damned! There’s no way Apple expects to be successful playing that game, anymore than they will build a standard wireless handset. When it comes to mobile phones, the big money is in the smartphone segment.

    After all the bad moves Apple made in the 1990s, their present strategy is a good thing. Sales are high, profits are high, and most customers love their iPhones, iPods and Macs. Why should it be otherwise?

    This doesn’t mean that Apple will never produce the exact computer you want, if you can’t find it in their current lineup. It’s still all about sales and customer demand. At the end of the day, if Apple sees sales tanking in a particular market, they’ll do something about it.

    Consider, if you will, Mac desktops. Sales are down industry-wide, not just with Apple. Some three quarters of all Macs sold these days are note-books, at least according to the most recent quarterly financials. So in creating a new iMac lineup, Apple gave you larger screens and also a special quad-core configuration that, for now at least, trumps the Mac Pro in many performance benchmarks. Indeed, I expect many content creators who found the Mac Pro too rich for their blood are opting to select quad-core iMacs instead. This is a move, by the way, that I’ve seriously considered, and I’ll let you know my decision soon.

    Meantime, if you still want Apple to make a computer that’s not in their current lineup, such as that mythical midrange Mac minitower — basically an iMac without the integrated display and extra expansion capabilities — some of us have written about, the best you can do is tell them what you want. If they get enough requests, they might consider it, but if desktop sales don’t improve, don’t bet on it now or ever.



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    7 Responses to “Does Apple Build the Gear You Want?”

    1. westech says:

      Remember the 80:20 rule? It says that 80% of your sales are generated by 20% of your products. So what happens if you dump the 80% of your products that makes up the 20% of your sales? You simplify your manufacturing, lower your costs, minimize inventory problems, and you have an Apple business model.

      Manufacturing people like to increase their volume to absorb more overhead, and salesmen want to have a full product line, i.e., never have to turn down a sale because they don’t make the product even if they have to sell it at a loss. This contributes greatly to the 80% of the products but not much top the bottom line.

      Here is a quote by Jonathan Ive (seehttp://brainstormtech.blogs.fortune.cnn.com/2009/07/01/a-fireside-chat-with-apples-jonathan-ive/):

      Ive was insistent that the key to Apple’s success was that it was not driven by money – a claim that may raise eyebrows amongst shareholders and customers – but by a complete focus on delivering just a few desirable and useful products.’For a large multi-billion dollar company we don’t actually make many different products,’ he explained. ‘We’re so focused, we’re very clear about our goals.’ ”

      Apple sells computers which fill the needs of a market segment. They do not try to satisfy all their customer’s needs. The options they offer are mostly limited to memory, disc capacity, processor choice and screen size.

    2. Andrew says:

      I’m pretty fond of most of Apple’s lineup, have been since about 2003. Sure, I wish there was something smaller than the 13″ MacBook Pro that still was full featured, like the 12″ PowerBook, only with an 11″ display and the modern metal unibody that weighs closer to 3 than 4 lbs. Such a machine doesn’t exist and so I am faced with two choices on either end, a 4.5 lb 13″ MacBook Pro that has everything I want but is a bit heavy, or a 3 lb MacBook Air that gives up desired features to get its thin profile.

      Apple’s choices were not my own, but in use, the MacBook Air has exceeded my desires for an 11″ MacBook Pro. The width, which I thought would be annoying, isn’t, while the slim profile, which I thought would be all for show, brings the very real benefit of not needing a computer bag anymore (it slides into my regular briefcase between, well, legal briefs). Yes, I wish it had a regular hard drive (500 GB good, 128 GB not so good) and more than its single USB port, but after a year I still love using the MacBook Air.

      Before the Air, I tried to love a 15″ unibody MacBook Pro to use as my primary computer. It was thin, light enough for long trips (the Air is for short trips and court) and the display was just awesome. The problem was, I like to use a full-size laptop as my primary computer at home and the office, connected to an external monitor (dual-display with the laptop LCD) and desktop peripherals. I thought I could tollerate plugging in all of those cables, but I was wrong. Most business-oriented PC laptops have docking connectors, as does my ThinkPad T400. I buy the cheaper port-replicators, but for those who want it the full docks even have internal hard drives and PCIe slots for video cards and the like. My T400 has a powerful 256MB ATI video card that easily drives a 20″ monitor and the laptop display at the same time over DVI connection. I will probably upgrade the monitor soon to a 24″, using the 14″ laptop display for my PIM (Outlook) and the large monitor for two documents side-by-side (my preferred way to work). With the MacBook Pro such capability also exists, but required plugging in three cords, display, power and USB. On the ThinkPad, I set the laptop onto the port replicator and open the display, everything is connected, always.

      The Air is an example of Apple not making EXACTLY what I want, but coming close enough while managing to surprise and delight in the process. The ThinkPad is an example of Apple just not offering what I want, docking, forcing to turn elsewhere.

    3. arw says:

      If Apple does not make its infamous xMac, a minitower, it will never know if desktop computing is dead or not. Why would I buy an iMac as it is but a notebook computer that lacks portability? It makes much more sense to buy a notebook computer instead, particularly since CPUs are all pretty powerful these days. I still run a PowerMac G4, waiting for an xMac. The Mac Pro is more than I need; but more importantly, more than I want to pay. What I want is a God Box minitower for about $2K. It would have the fastest Xeon CPU, 6 RAM slots, 2 drive bays, 2 optical bays, 1 PCI slot (for expansion later), a decent graphics card, USB 3, SATA 6.0, Firewire, and Ethernet. Basically, it is just a scaled down Mac Pro with premium components, and a smaller form factor. I will never buy an iMac, and I don’t want a notebook. So it is Apple’s loss, not mine.

      • -hh says:

        @arw,

        If Apple does not make its infamous xMac, a minitower, it will never know if desktop computing is dead or not.

        Dead Desktop –vs- xMac? Not necessarily so: one has to first really examine who the potential buyer is of the xMac, and if that would be a reasonably profitable segment for the supplier (Apple), before trying to claim that it could have been the savior of the desktop market segment.

        After reading hundreds of xMac threads, it is very clear to me that the xMac buyer demographic is the home enthusiast who predominantly wants easy DIY upgradability, but what’s key is the reason he wants this. It is partially tech updating, but it is predominantly financially driven, since 90% of the time, the sentiments also say “I’m willing to pay up to $XXX” .

        This consumer strategy (and FYI – I’m guilty of this myself) is to be fiscally frugal by extending one’s hardware’s lifespan through deferring new purchases through low(er) cost incremental upgrades. The problem is that a consumer who keeps his machine for years is a segment that is not profitable for the hardware seller, because the rate of replacement units is impacted.

        – – and historically Apple learned this lesson with the PowerMac 7500-8500-9500 product lines a decade ago, because their CPUs were on easy-to-DIY-replace daughterboard cards. As such, the clamboring for an xMac is effectively asking them to repeat a mistake – –

        (and FWIW, I’d like to have an xMac too…but I happen to recognize why it is unlikely)

        Continuing, when one gets to these consumers’ wish lists, we find desirements such as “the fastest Xeon CPU”, which currently is the Gainestown 3.3Gz W5590, which went on sale 3 months ago for $1600…for just the CPU. As such, the rest of the machine can’t exceed $400 in order to stay within their prescribed $2K budget limit, even though we already know that this remainder will be eaten up by the cost of proverbial “decent graphics card” on the wish list, even before we get to the big HD and other components.

        As such, this market segment ultimately gets binned in the same reject pile as the other ones which provide zero profit potential. And one can even philosophically argue that by not losing money on them (due to unrecoverable fixed & development costs), companies like Apple “ profit” by choosing to let these customers go elsewhere and be a net expense burden on a competitor.

        And in the final view, I see the $2500 Mac Pro as only being $500 higher budget-wise, which over the 5-6-7 year lifespan of the frugal DIY home enthusiast works out to a difference of a mere $7/month.

        -hh

        • Andrew says:

          @-hh,
          I think you hit it. I have a 2004-model Power Mac G5 that is still happily chugging away under my desk at work. It runs Leopard just fine and has been very slightly upgraded over the years to 2 GB of RAM and a pair of 1 TB hard drives. Those hard drives are its reason for being with all other Macs in the office backing up to one of them, and all of my music, photos and software installers backed up to the other. Its 5-years-old, and with its internal and external expansion capabilities may very well last two or three more years before I retire it. Obviously, Apple isn’t making any money on a machine that sits and minds its business for 5 to 8 years.

          Contrast that to laptops. I always own two laptops, a mid-sized thin-and-light and an ultraportable, and replace each of them on alternating years with something newer and faster. Apple sold me a 12″ PowerBook in 2003, another in 2005, a black MacBook in 2007 and a MacBook Air at the beginning of 2009. IBM/Lenovo sold me a ThinkPad T42p in 2004, a T60p in 2006 and a T400 in 2008. These units usually cost about $1500 give or take, and are replaced every other year, resulting in a nice continuous revenue stream for Apple and Lenovo. Compare that to upgradable models. If you bought an upgradable Pismo PowerBook in 2000 it wouldn’t have been outdated until the arrival of Tiger in 2005, and arguably not even then. The same for an IBM ThinkPad T20 purchased in 1999, that with a processor upgrade will run WIndows XP with speed and stability and is only left behind by Vista. Clearly, Apple made less money on the Pismo that people upgraded and kept than on the Titanium and Aluminum that were stuck at their original speed.

          I might buy an xMac if such a thing was released, but I would prefer it be lower in spec. A non-Xeon Corei7 is a much cheaper and just about as powerful solution, while a solid mid-grade GPU instead of a screaming gamer card would make more economic sense. Even the Mac Pro doesn’t come standard with a super fast gaming card, though Apple does offer such options, which it could easily do on a minitower a well.

          The problem is that Apple has no economic reason to build such a machine, and so people who insist on expandability will either make do with a PC, or pony up for a Mac Pro, but keep it longer than Apple would prefer.

    4. David says:

      Apple doesn’t make a perfect machine for me, but the new iMac is as close as they’ve gotten in a long, long time. Getting a real desktop processor, IPS display and 4 memory slots makes it seriously appealing. The following are my remaining issues:

      1. I tried using a new 27″ iMac in an Apple retail store. It was fairly easy to pick out the pattern on my shirt and I kept seeing reflections of people walking behind me. Something needs to be done about that, but traditional matte finish has its own set of limitations. Art gallery style glass would be my choice even if it meant the price had to go up a bit.

      2. All-in-one computers have historically had a much higher defect rate than separate computer+display solutions. AppleCare is an absolute necessity and after 3 years you’re playing Russian Roulette with an iMac.

      3. The slot loading optical drive is slow and highly prone to failure. Just look at all the people who couldn’t install Snow Leopard. Some of those people had never even used their drives. Luckily optical drives are becoming increasingly irrelevant.

      4. The internal hard drive is still tough to upgrade. I know Apple is never going to make it easy to remove a HD from an iMac and I totally understand why, but it’s a reason why the iMac isn’t perfect for me.

      5. I’d like a machine with space for two internal hard drives. Unless and until Apple implements a better way for two users to share iPhoto and iTunes libraries I will need to maintain a drive with permissions for the OS, apps and home folders; and a second volume with permissions disabled so both my wife and I can edit the same collection of photos.
      A side effect of this situation is multiple backup drives are needed and Time Machine can only handle one of them.

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