Blog Post

Are Apple’s High Laptop Prices Sustainable?

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

bentleybookThe brushfire popularity of small, inexpensive laptop computers, aka netbooks, shows no sign of losing steam, with a reported growth rate for the category of 80 percent so far in 2009 (vs. a general laptop growth of around 13 percent), putting netbooks on track for sales of around 21 million units this year. Apple (s aapl) consequently faces a daunting challenge, with only two notebook models selling for less than $1,500, and no offering in the expanding netbook market.

Negative Lookout For Netbook-less Apple

This week, ChangeWave’s Jim Woods and Paul Carton report that, according to their April survey of 3,231 consumers, they’ve picked up a jump in planned laptop spending going forward, led by escalating netbook demand. That’s not good news for netbook-less Apple. Nearly a quarter of respondents to the latest survey (23 percent) who plan to buy a laptop in the next three months say it’ll be a netbook, five points higher than in ChangeWave’s February sample.

The good news is that Apple’s premium-priced lineup has helped make it the most profitable company in the personal computer business. The bad news is that the company’s position in notebooks appears to be unsustainable if it wants to maintain or grow its market share and stay a significant player.

Apple Becoming The Bentley Of Personal Computers?

In a recent commentary, BusinessWeek’s Stephen Wildstrom observed that while Apple has long seemed to aspire to be the BMW of the computer business, these days it’s in danger of becoming the Bentley. He has a point.

For instance, while Apple’s Q1 2009 financial results last month recorded the company’s best non-holiday quarter ever, with over $8 billion in total sales and profits of over $1.2 billion, or 14.8 cents of profit for every dollar taken in during the period, MacBook sales actually dropped a whopping 22.1 percent in the quarter. One European study even reported that netbooks accounted for 30 percent of all notebooks sold in Europe during Q3 2008.

Apple Sweeps Consumer Reports Notebook Ratings

On the other hand, the June issue of Consumer Reports gives Apple’s MacBook family of notebooks top ranking in the 13-inch, 14-inch to 16-inch, and 17-inch categories, even though many of their competitors cost less. The 17-inch MacBook Pro got the highest rating of any notebook reviewed by Consumer Reports, scoring 80 points out of 100, and rated “Excellent” or “Very Good” in all tested categories, so Apple has to be doing something right.

So people like the notebooks Apple is currently making, but cost seems to be the primary factor motivating consumers going forward. There is pull in both directions.

Apple Delivers Value

Personally, I’m not feeling at all ripped-off for paying a premium price (by PC standards) for my new unibody MacBook, which is a delight to use. I could have had a Windows laptop with a larger screen and more features for hundreds less than I paid for the MacBook, but I would have got what I paid for: a generic PC. The MacBook isn’t perfect. I remain convinced that dropping FireWire was a serious mistake, and there aren’t enough USB ports, but aside from those points, I have no serious complaints.

The 2.0 GHz Core 2 Duo MacBook with Nvidia GeForce 9400M integrated graphics has ample power for my needs, has so far been reliable (admittedly early days yet), looks and feels great, with a standard of workmanship reminiscent of a fine Swiss watch.

Unfortunately, it’s evidently becoming more difficult to convince cash-strapped and recession-weary consumers who’ve never experienced the joys of Mac ownership that the added value for the extra money really is worth it, which is the nexus of Apple’s laptop pricing dilemma.

Moving Downmarket?

I’ve been an advocate of Apple moving downmarket in order to protect and hopefully grow market share, but I also agree with BusinessWeek’s Wildstrom that Apple is probably right to shun the extremely low-profit bottom end of the laptop category. However, there’s a good case to be made for Apple wading in to the burgeoning sub-$1,000 “thinbook” category that blurs the distinction between netbooks and notebooks — machines I call “crossovers.”

Wildstrom suggests that one netbook/crossover strategy Apple could employ would be a MacBook based on Intel’s soon-to-be released Consumer Ultra-low Voltage (CULV) processors, paired with Nvidia’s 9400M graphics as used in the current MacBooks, to create a 12-inch notebook priced at perhaps $800. I wholeheartedly agree, and can almost see 12-inch PowerBook aficionados dancing in the streets and lining up to buy just such a machine.

11 Responses to “Are Apple’s High Laptop Prices Sustainable?”

  1. I have been a Mac user and Apple watcher for some years now, and also offer a Mac upgrade service in the UK, I have finally concluded that Apple just does not want to compete on price (in the UK at least) and I have a theory as to why…

    Apple know in their heart of hearts that one of the big advantages to computing on Macs (possibly the biggest) is the lack of malware on the platform. Whatever they say publicly they also know that this is largely due to their small overall market share in the personal computer business. People seem to generally agree that Macs are better than the nearest equivalent Windows based machine, and that the overall user experience is better, largely due to the lack of viruses etc. The net effect of Apple moving down market could be that they end-up making less money selling more computers. Not only this but when the Mac reached a certain point of market penetration, maybe thirty per-cent, I don’t know, the writers of malware would no longer be able to ‘neglect’ the platform, and at that point the best feature of the Mac would be lost forever – the Mac would be another commodity product, that could achieve only competitive prices, not premiums against the offerings from other computer makers

    I think this is why we will not see cheap Macs anytime soon

  2. Christian

    I own a MSI wind U100 with 2GB RAM, 160 GB Harddrive.
    The keyboard is good for the size but still hard to use.
    Screen ist just too smal – 1280×800 pixel the screen should be! Trackpad is HORRIBLE if you’re used to a Mac.
    Battery time is fine (4.5-6 hours) with the 6 cell model.
    Would i buy another one – with an Apple Logo on it, with Leopard and for around 500$ if available. Otherwise get a white MacBook.
    The whole netbook thing seems overrated to me.

  3. Charles W. Moore

    Hi Gazoobee;

    As a matter of fact I’m of a mind that the iPhone and touch, both of which have thero place, are a completely different animal than the netbook laptop, and do not seriously compete in the same space. I’ve ranted about touchscreen “keyboards” here fairly recently, so will not go into that except to say that for me at least, no machine without a real keyboard and a screen of at least 10″ would be adequate for what I need in even a lightweight Internet machine.

    I think just about everyone knows what “netbook” signifies by now.

    As for MacBooks and CULV processors, DigiTimes’ Monica Chen and Joseph Tsai reported yesterday that Intel has outlined its plans for traditional notebook, CULV-based ultra-thin notebook and netbook product lines for its partners, according to sources at notebook makers.

    Chen and Tsai note that Intel’s next-generation Calpella notebook platform will launch as scheduled in the third quarter 2009 and targeting models in the 14.0-, 15.6-, 17.1- and 18.4-inch segments at retail prices of above US$1,200 initially for high-end market — presumably inluding tha MacBookn Pro.

    Their report ( alsosays that notebook makers, including Apple subcontractor Quanta Computer, are ramping up to mass produce Calpella-based notebooks in the third quarter with more models to launch in Q1 2010, and that in the 12- to 13-inch segment, Intel will be pushing CULV-based ultra-thin notebooks the major force targeting the $699-1,100 price range that takes in the low end Apple MacBooks, and I would venture a likely Apple entry in the $800 or so price range/


  4. Gazoobee

    No offence but this article is just wacky.

    First off, you talk about how Apple has “no offering” in the netbook market and call them “netbook-less Apple,” without mentioning (even off-handedly), the general understanding of the tech press that the iPhone and iPod touch platform is Apple’s entry into this market. You may disagree or even mention it with scorn, but not to mention it at all reveals the bias of your story.

    Secondly, the entire article is about “netbooks” yet you do not define what you mean by that. The text suggests that you are talking universally about *cheap* computers or a segment of the market based on price, whereas the netbook category is just as often formulated as being based on size alone and *not* on price. Furthermore, other formulations of “netbook” are based on function and portability and would even include such computers as MacBook Air. Needless to say this muddles your argument.

    Then you end the whole thing with a quick advertisement for some intel technology that wouldn’t be in Apple’s plans in a million years! Egads! Who paid you to write that in?

  5. It’s not just about the money. I want a small machine that I can carry everywhere without tearing my bag or hurting my shoulder, and that I can use in smaller places like coach class (hmmm. maybe Macs are only supposed to be used in Business and up?). I’d like that machine to be powerful enough that it can be my main machine and I can plug it into an external monitor. I’d pay for one of those.