Is Apple's New MacBook Affordable Enough?

by: Larry Dignan October 14, 2008 | about stocks: AAPL    

Larry Dignan

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Apple (AAPL) on Tuesday moved to address a weakened consumer and its statement on a its refreshed MacBook lineup is telling. Since when does a premium brand like Apple worry about price and making its notebooks “far more affordable?”

The company’s latest MacBook lineup (live blog, Techmeme and statement) sparks the usual buying impulses–at least in me since I want one–but one question remains. Did Apple and CEO Steve Jobs go far enough to become affordable and grab more buyers?

To wit:

  • An updated 13-inch white MacBook is now available for $999. That puts Apple in the sub-$1,000 category by a buck. In its statement–and presentation for that matter–Apple glosses over the fact it’s playing price in the lower band of its lineup.
  • The rest of Apple’s MacBook lineup, detailed here by Adrian Kingsley-Hughes and Jason O’Grady–will run you from $1,299 to $1,599. As the MacBook Pro will run you more.
  • Apple mentions that consumers are getting an advanced machine for $700 less than before, but that still may not hit the price points that buyers want.

I realize that Apple is trying to walk a line here. Apple is a high-end brand that’s increasingly catering to the masses. It wants to play ball at lower price points, but doesn’t want to go so low it’s involved in the usual PC industry scrum. It seems like Apple has walked that line better than most, but it is becoming difficult.

The issue here is that Apple barely hits a price point that moves a ton of volume.

Here’s a look at the market courtesy of Keith Bachman, an analyst at BMO Capital Markets:

macbook.png

As you can see, Apple has moved toward a weakened consumer a bit, but still is $100 more expensive than the fattest demand band. You can argue that Apple’s brand is worth $100, but with the consumer retrenching that bet may not be a no-brainer.

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This article has 14 comments:

  •  
    Oct 14 04:26 PM
    It's still a no brainer.. when put side by side a sub $1k windows laptop and a macbook the winner is the macbook ..
    I'll gladly pay $100 more for a mac with OSX
    Reply | Link to Comment
  •  
    Oct 14 04:30 PM
    they seem to be doing quite well without drastically lowering prices, why would they want to compete on the low-end at this point?
    Reply | Link to Comment
  •  
    Oct 14 04:41 PM
    It's not exactly the price I'd want, but the bottom line is its still cheaper than before which in itself is enticing. I see it as a saving either way, whether its the amount I want or not. It's still less than before, and I'm more attracted to buy it.
    Reply | Link to Comment
  •  
    Oct 14 04:52 PM
    No more firewire 400 pretty much alienates digital video, audio, external hard drives, etc., USB is not high speed. Dumb.
    Reply | Link to Comment
  •  
    Oct 14 04:53 PM
    With educational discouts, corporate discounts,etc., Apple has more than one laptop in the sub-$1,000 zone.

    Apple does not want to go where Dell et al are, period. They can have the 700 dollar shithole all they want. Apple is sucking out all the profit in the laptop market leaving the bones for the rest of the rabble.
    Reply | Link to Comment
  •  
    Oct 14 05:28 PM
    Re: No FireWire 400. Sure, it does: FireWire 800 ports support FireWire 400 with the right cable and vice-versa. I have a FireWire 800 device working on a FireWire 400 bus right now.
    Reply | Link to Comment
  •  
    Oct 14 05:32 PM
    Actually, Firewire 400 and USB 2 are pretty comparable in perceived speed, especially because many Firewire devices do not operate up to the full throughput in the standard's reference spec. There is a reason that Apple transitioned the iPod to USB 2, and it wasn't just to capture Windows users (although obviously a big factor).

    Now, Firewire 800 is a different matter altogether...

    And if you have high-end data moving needs, you can probably spring for the MacBook Pro, which still has Firewire.
    Reply | Link to Comment
  •  
    Oct 14 05:33 PM
    I've owned Macs and PCs and while i prefer the Mac i always wind up with a PC because you really do get more bang for the buck. I cannot get myself to pay the premium.

    And while the Mac is definitely easier to use once you spend the time to learn the PC and know it well enough the ease of use issue goes away, at least for me.

    MACs are, in the end of the day, more expensive.
    Reply | Link to Comment
  •  
    Oct 14 05:41 PM
    As for the original question of whether lower prices matter. I think not. You can always price lower to increase volume, but at a cost to the profit margin. At a point, you either reach the point of diminishing returns, or you have to reduce the cost of the product to eek out more of a margin.

    Apple didn't give in to the low-cost pressure until they could reduce their costs, in their own way. And that is one of the big news points from today. They were saying that with the new production and assembly processes they've reduced the cost to manufacture their laptops. Which means they can lower the prices and still keep their premium margins.

    And I want them to keep their margins because that's what fuels the R&D. I mean, look at the cut-rate Dell - where are their designs pushing the envelop and advancing the technology? Nowhere. Because that's not their business model, and they don't have the margins to support a large R&D investment.

    Apple does, but they also have to be allowed to recoup that investment.

    I think they are right on target - nice going, Jobs & Co.!
    Reply | Link to Comment
  •  
    Oct 14 06:08 PM
    Considering the new features the new price points are very good. A $700-800 Macbook with the new feature would probably devastate margins. The new frame itself has to make it by far the most durable solid notebook ever and is unlikely to be copied by others, or at least not combined with a price cut. Dell, HP would have to raise prices to do the Macbooks new features.
    Also, don't be surprised if the 10 mil goal has not been reached by earnings release. Rumors on Apple ALL YEAR, have turned out to be just that!! That's why people sell the news, because it's not news, it's LIES!! EMEI data is intriguing, and I hope it's true, but should be approached with caution.
    Reply | Link to Comment
  •  
    Oct 14 06:11 PM
    @User 6805:

    I think you consider a PC "more bang for the buck" because you are only looking at the hardware.

    There is the Total Cost of Ownership, and factoring that in there Apple always wins:

    * People use Apple computers longer than PCs because they are higher quality and don't suffer from the typical Windows bloat-ware (i.e. the tech specs on an Apple are outdated by new software before it is even sold)

    * People spend less time "protecting" their Apple computers from danger - saved time = money

    * Apple computers do more out of the box - there is no Windows replacement for iLife - nowhere, nohow; even the 800-lbs gorilla of iLife, iPhoto, still doesn't have a Windows counterpart that can do it all in one easy-to-use, integrated package; I still get comments on my iPhoto books about how wonderful they are, and how did you make them, etc... And I laugh inside when in other situations I hear people lament about their piles and piles of digital photos that they don't know what to do with, or still have on photo CDs.

    * Apple computers are the total user experience, integrated, and superior to the PC market. I am amazed at how easy it is to use the Internet, email, media, buy apps, etc. on my iPod Touch. It works so well because of Apple's attention to detail and focus on the user.

    Anyway, all of Apple's products seem "expensive" compared to most of their competition, but you get what you pay for, and then some!
    Reply | Link to Comment
  •  
    Oct 14 06:27 PM
    1. The lower price points have computers that do NOT match the features and capabilities of the Apple computers.

    2. The lower price points are, for the most part, LOW MARGIN and VERY LOW MARGIN. Apple is not a charity. If you want a cheap computer, and by cheap I mean LOW QUALITY, buy a Dell.

    3. Send your report to Mercedes and BMW and they will laugh. They don't want to fight for the bottom, and neither does Apple.

    4. NONE of the lower price points can run Mac OS X. That alone makes them true SUB-notebooks.
    Reply | Link to Comment
  •  
    Oct 14 06:38 PM
    I use a PC at work and a Mac at home. In the last three years, I have replaced my HP laptop at work twice because of hardware issues. I remember buying my first Apple product, an iBook G3, in 2002 and I sold it in great working condition for a good price last year. That's after 5 years of use. I bought myself a MBP in 2006..it's no way a fancy machine compared to what's coming out now, but it still works great for a 2 and 1/2 yr laptop. Even the iPod that my wife gifted me 4 years back works great! Long story short - you do a pay bit more for an Apple product, but they do last you a long time. To mean that means I have gotten my money's worth.
    Reply | Link to Comment
  •  
    Oct 15 10:41 AM
    Apple is to computers what Bose is to sound. you don't see Bose churning out cheap main products. with student and other discounts, some Macs are well under $1000. They aren't looking to be sold in wal-mart. in the tech world, in a very tight economy, the cheaper stuff suffers because the people who buy them are doing worse than the people who are better heeled.
    and, used but repaired to 'like new' status macs of all sorts can be purchased on the apple website at very good prices.
    Reply | Link to Comment
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