Apple Pricing Dance

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Date: Monday, February 1st, 1999, 00:00
Category: Archive


Bob Snow
Contributing Editor

Dell and Compaq are locked in a price war. The object is to gain market share and the painful side effects are non-existent profit margins and short term losses. [Ed: Dell and HP recently introduced consumer notebooks for about $1,000.] This type of competition is not sustainable and has these manufacturers focusing on unit prices at the expense of product development. Customers gain short term on price but lose in terms of future product choices. Apple will never be able to compete at the low end of the market, but they are sustaining themselves right now by introducing compelling new products at competitive price points.

I’ve been reading the public responses to the new iBook pricing at various forums. At Mac venues, the new price/performance ratio is typically applauded. Mixed sites usually find PC types railing about why anyone would buy the newest “Macintrash” laptop with it’s slow 500MHz processor and outrageous price. They would much rather have a 750MHz generic PC with lower quality screen, no firewire, short battery life, two pounds heavier running Windows for a few hundred less. These folks will never become Apple customers. I think Apple is able to offer the new iBook at such a good price because of the expectation that it will outsell the old iBook by at least a factor of two. I applaud the fact that they stuck with the unique ruggedization, even though it adds to the size, weight and cost.

It looks like Apple is getting out of the CRT monitor business. Reviewers will soon be able to take the G4 Cube and add the price of the 15″ LCD to the base model and then compare it to some generic PC with a cheap 17″ CRT. The Apple 17″ CRT is only there to sell with lower end systems and it’s expensive for what it is. Many customers order a Cube from the Apple store wanting a turnkey system. I hope LCD prices continue to plummet because the 15″ LCD is going to represent the base model screen for the Cube and G4 tower. Creative professionals will not be effected, because they typically don’t buy the Apple branded 17″ CRT. Apple probably has a good handle on where the price of LCD screens is headed especially with the stake they bought in Samsung. If the price difference between LCD and CRT’s narrows enough, the shipping cost will become a real factor and could tip the scales in favor of the flat panel.

Arguably, the base level iMac is the most important machine for increasing the installed base for the Mac OS. Profit margins be damned, Apple needs to grow its market share, so they probably shave margins to the bone on this machine. I wonder how much switching to an LCD screen on the iMac would cost right now? There is also the risk that the price gap between LCD and CRT screens will stop narrowing. Picking a new screen for the next iMac has got to be one of the most nerve wracking decisions for Apple because they cannot afford to price their volume consumer machine too high nor can they allow sales to decline as the current design loses its appeal.

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