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Apple’s Budget Macs: Real Possibility or Wishful Thinking?

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Apple (s aapl) computers are expensive. Whether or not you think that price is justified, you can’t deny that even machines on the lower end of the scale will cost you a decent amount of coin.

The Mac Mini is the cheapest machine in the bunch, and you don’t get any crucial peripheral gear like a monitor, keyboard or mouse without paying extra. Putting aside for a second our dear devotion to the Cupertino brand, if you know absolutely nothing about computers, and you’re presented with two all-in-ones side by side, and the price tag on the Dell (s dell) is a lot cheaper, you’re probably going to get the Dell. You’d be wrong, but that doesn’t change the fact that that means a sale for Dell, and nothing for Apple.

Why It Sounds Reasonable

Given that chilling scenario, recent rumors that Apple is prepping some lower-cost hardware to bring to market makes sense. They showed recently that they were relatively resilient, even in tough economic times, by posting record gains yet again for the second quarter of 2009, but Mac sales actually slowed during the same period, meaning that Apple is likely looking for a way to improve those sagging numbers.

AppleInsider cites “people familiar with the matter” as the source of the pleasant prospect of cheaper machines coming out of Cupertino. Their source maintains that the cheaper hardware to be introduced is designed as a stop-gap solution to counter the runaway success of netbooks until Apple is ready to release its own Newton-esque tablet-style device, which is taking longer to develop than anticipated. Apple’s new, lower-cost menu is said to include cheaper versions of both the 13-inch MacBook and a new entry-level iMac, possibly priced in line with its education-only predecessor.

Why It Doesn’t Make Sense

Sounds like a good idea, and there’s no doubt consumers would appreciate it, but does it make sense from Apple’s perspective? I think not, for a couple of reasons. First, they would be coming pretty close to interfering with their own clear price level demarcations. Apple is very good at pricing their products in such a way that each fits into its own clearly demarcated space, but that you also see the obvious value of going up to the next level. To start introducing products that clear the next level up by only a hundred dollars (and ones that probably offer significantly downgraded specs) would throw this delicate balance out of whack.

Second, as I’ve just mentioned, the new machines would probably have to offer big concessions in terms of hardware (they’d never sacrifice build quality) in order to provide profit margins acceptable to Apple. Crippled specs would just have people complaining that they could get a Dell with 10 times better internals for the same price, which would put us exactly where we are now: Apple fans saying the product is better overall, even if on paper it doesn’t look it, and PC faithful clamoring about the Apple Tax.

So no, I don’t think Apple will introduce new, cheaper machines to bolster Mac sales. They have to do something, though, if the dip repeats itself for a second quarter in a row. No doubt their solution will be much more interesting than just a price/quality cut, which is exactly the kind of uninspired move a PC manufacturer would make.

Another Option

If Apple really wanted to cause people to sit up and take notice, and sell computers to customers like me who already own multiple Mac desktops and laptops and to people looking for their first Mac, they’d give us a reason to look at a Mac Pro. Or not the Mac Pro exactly, but something like it. Give us a tower with accessible internals, with minimal specs but lots of potential for self-installed upgrades down the road. Then sell us those upgrade parts through the Apple Store with official Apple branding. It’s almost a cheap razor/expensive blades sales model, but I admit it involves a lot of risk, since you might get undercut by third-party providers on the upgrade components. Still, it would be unexpected coming from Apple, and that is sort of their thing.

12 Responses to “Apple’s Budget Macs: Real Possibility or Wishful Thinking?”

  1. Scott

    It really doesn’t matter what anyone outside Apple says. The fact is Apple is denying they’ll ever introduce a netbook. The more they deny it the more obvious it is that that’s exactly what they’re about to do. With liberals you take what they’re saying, turn it around 180 degrees, and you’re closer to the truth… Remember when Apple said there would never be a video iPod just weeks before introducing it? Steve Jobs went public and said nobody would want to watch a movie on a 2.5″ screen. Remember all those statements about Intel? Now most iPods have video and all Macs have Intel processors… I predict in a few weeks Apple will introduce their new netbook. It’ll probably be higher priced and higher quality than the competition. It may have some fancy new features the other netbooks don’t have. This would be in keeping with Apple’s recent history.

  2. Howie Isaacks

    If this is true, the timing isn’t very good. Microsoft has been running ads accusing Apple of being too expensive. If Apple starts lowering prices, they might as well also post an ad admitting that they’ve been over charging us all along. Don’t get me wrong. I would love to see Apple’s prices come down. My worry is that they might lower quality to do it. Quality is expensive sometimes. That’s why I don’t whine about paying more.

  3. Louis wheeler

    If you had read the articles regarding the lg-ke850 you would know that it was never a production mobile phone. It was a prototype and it was nothing like any of the Smart phones in operation. That is, it was not within years of production. Hey, even the iPhone was lacking when it was introduced.

    So what if the smart people at lg were thinking along the same lines Apple? What lg did was to take the iPod and enlarge it into a phone. This was good thinking, but did this phone come out in competition against the iphone? No.

    The facts about some the parts of the iPhone were evident from the suppliers even before the IPhone was announced, so it was easy to create a mockup. I’ve seen prototypes Apple Phones during that period, which bears no resemblance to the iPhone.

  4. Louis wheeler

    It doesn’t seem likely, to me, that Apple will produce anything that looks like a Netbook. Why? Because the people who are arguing for this are demanding that Apple act like a copycat. Apple doesn’t do that. Just look at the iPod and iPhone; they are nothing like the then current Music players or Mobile Phones.

    Apple created their own niche and expanded it. I would expect the same if Apple entered the Netbook market. It would have a competely different form factor.

    What I would like to see is an iPod Touch in pocket back book size with a higher screen resolution to keep the size small enough.

    A 6.6 inch screen in 16/10 format at 240 dots per inch would have 1344 by 840 pixels. This would create a device about six inches by 3.75 inches which would fit in a purse or back pocket. It would be ideally sized for a movie viewer, e-book reader and personal game player. It would build on Apple’s success. It would do everything you would want an Netbook to do, but it would cost only about $299 to $399.

  5. Infophiliac

    >> if you know absolutely nothing about computers, and you’re presented with two all-in-ones side by side, and the price tag on the Dell is a lot cheaper, you’re probably going to get the Dell. You’d be wrong <<

    No. Macs are not right for every situation (and I say this as someone who owns both an iMac and Macbook Pro). If all you really need is a glorified netbook to send pictures of the kids to Grandma, and you’re on a restrained budget, that Dell might be exactly right for you. Given a choice between sending the kids to camp and buying a Mac just to run Safari and Mail, you might be better served by getting that Dell.

  6. Brian

    I think they are moving in this direction, waiting to strike. They already own the majority of all purchases above $1000. Something like 2/3 of all machines over $1000 are Apples. That is huge, and it’s the hardest part, not the low hanging fruit.

    They can easily come out with a low spec’ed machine, perhaps with their own processor, and a small screen that won’t compete with their laptops. Any way you look at it though, the margins would suffer. They would have to make up for that in volume.

  7. David

    Who is engaging in wishful thinking now? Apple has had years to re-introduce an affordable desktop or tower and they’ve steadfastly refused to do so. Those of us who’ve been waiting for what seems like forever have given up on ever seeing one.

    Clearly Apple has sales projections that show a tower would be a poor use of resources.

    The razor/blades approach only works when people have to buy compatible blades. Intel Macs use generic RAM, generic hard drives, generic optical drives, etc. Some day soon PCs will adopt EFI instead of BIOS and even generic video cards will work, provided there are drivers.

    Apple won’t be able to sell blades so they need to charge a premium price for the razor.

    Apple really only succeeds where they control the entire widget like they do with their laptops and iMacs or when dealing with Pro customers who think nothing of paying 3 times too much for a hard drive. Hard evidence: Canadian Apple Store wants $360 for a 1TB drive that costs only $110 at my local PC shop.

    The Mac mini is as far as they’re willing to go with a modular Mac and once you add a usable amount of RAM, decent HD, keyboard and mouse you’re up into iMac price range and you’ve got an inferior box with no display.

    I do not believe Apple will bring out new, lower models. Not only will it cheapen the brand image it would show a large number of people that they can get away with less Mac and that would forever harm their ability to up-sell people in the future.

    If Apple does anything with prices it will involve squeezing their suppliers for better pricing so they can make some small retail price cuts without hurting margins.

  8. >> Crippled specs would just have people complaining that they could get a Dell with 10 times better internals for the same price, which would put us exactly where we are now <<

    Disagree. The reason there seems to be an Apple Tax at all is because Apple doesn’t cripple their specs or build quality. If they did, as you suggest, then the prices would be comparable with a Dell with the same specs, not to one with with better specs.

  9. andrew

    The only way I see Apple lowering prices is to lower the prices of their upgrade options in the shopping cart. Paying $400 for 2 gigs of RAM is not realistic, but if they made it more market competitive Apple could still see more money while “lowering their products’ price.”