What makes the economy go is spending money. What makes the economy "healthier" is spending more money. If we're in a recession, it's because people aren't spending the money that they have, thus causing the problems we are experiencing, thus causing people to have less money. To solve the problem: buy a Mac.
While all this discussion of recession or not a recession is all well and good, the topic at hand was whether Apple should cut prices to increase marketshare
I'm a little ambivalent about this issue. On the one hand, we have the marketshare issue which translates into inertia. Once you switch platforms, it's relatively hard to switch back. I'll give Apple a point on this one. On the other, if Apple starts getting into what appears to be a price war with box makers like Dell, Apple will lose. A point against cutting prices. Right now, Apple's got the boutique mystique. Once they cut their prices, they lose that mystique. So, it's a tossup for me. Either way, I think that Apple's doing ok. We all know that the current iMacs are just to bide time until the next Big One comes out. They spread their kickass machines over quarters so that they don't blow their wad all at once. They can remain profitable from quarter to quarter rather than having one huge quarter followed by several so-so quarters. In the current economy, having consistent performance is more important than having a blockbuster quarter followed by nothing.
As I said before, Apple's plans were shot to hell when the cube flopped. That was supposed to be the Machine for the Sept. quarter. It didn't happen and they had nothing to show for the January quarter either. Now, they've had two good quarters (the TiBook, followed by the iBook) and a so-so one (this quarter will be unless the iPod miraculously does it, which I doubt). Next, we'll see the iMacs (at MWSF or thereabouts) followed by the PowerMacs (at MWTY, Seybold or MWNY). This is the way I see it, at least, IMHO.
Now, how marketshare will help a company like Dell which can't benefit from the inertia of OS switching is beyond me.
About the increase over last year's spending: bad comparison. Year-over-year comparisons to last year's Jan quarter will look rosy too, eventhough the economy sucks. Last November, we had already begun to see the consumer confidence drop leading to the lower spending. A better comparison would be one like % of household income spent or something like that. Anyway, my 2¢.
Although it is a widely held belief that Apple's margins are higher than everyone else's, are they really? I was of the understanding a year or so ago before the price wars set in that Apple's were not the highest and were in line with most others.
They have higher R&D and production costs than say Gateway or Dell, so their computers would still cost more, but I would be interested if anyone could show just where the profit margins of each of the major OEMs are at.
<strong>Although it is a widely held belief that Apple's margins are higher than everyone else's, are they really? I was of the understanding a year or so ago before the price wars set in that Apple's were not the highest and were in line with most others.
They have higher R&D and production costs than say Gateway or Dell, so their computers would still cost more, but I would be interested if anyone could show just where the profit margins of each of the major OEMs are at.</strong><hr></blockquote>
Apple has the highest profit margins in the industry by far. Their profit margins have actually GONE UP in this supposed "economic downturn". last quarter they were right around 30%!!!!
I think Apple could give us buyers a big break and still not get into the cheap PC level. The $1699 PowerMac would be much better accepted in the market if it:
A. Included a 17" Flat Panel Display
B. Was $1299
C. It actually had good specs
Unfotunately, from a technical standpoint, the entry level G4 is a budget PC specwise and a high end PC pricewise. One thing that is often overlooked when we compare Macs to other computers is the fact that many other manufacturers include a monitor, and a nice one at that. Not some 15" piece of crap.
<strong>Apple has the highest profit margins in the industry by far. Their profit margins have actually GONE UP in this supposed "economic downturn". last quarter they were right around 30%!!!!</strong><hr></blockquote>
Yes, but that figure of 30% is Apple's gross margin - that is all profits made on sales before it's operating expenses are taken into account. One such operating expense is research and development which, as Apple designs and develops its own hardware and software, is quite substantial.
In the year to 29 September 2001, Apple's gross margin was $1,235 million on net sales of $5,363 million (Around 23%). It's admin and R&D over that period totalled $1,579 million, for a net operating loss of $344 million.
As a comparison, Dell's gross margin over the same period was $1,313 million on net sales of $7,468 million (Around 17.5%), but its admin and R&D totalled only $769 million (Half that of Apple), for a net operating income of $429 million.
As things stand, there is no way for Apple to reduce its margins on hardware and gain enough in sales as a result to counter that loss. Which is why it's using alternative approaches like the bricks and mortar stores.
Yes, but that figure of 30% is Apple's gross margin - that is all profits made on sales before it's operating expenses are taken into account. One such operating expense is research and development which, as Apple designs and develops its own hardware and software, is quite substantial.
In the year to 29 September 2001, Apple's gross margin was $1,235 million on net sales of $5,363 million (Around 23%). It's admin and R&D over that period totalled $1,579 million, for a net operating loss of $344 million.
As a comparison, Dell's gross margin over the same period was $1,313 million on net sales of $7,468 million (Around 17.5%), but its admin and R&D totalled only $769 million (Half that of Apple), for a net operating income of $429 million.
As things stand, there is no way for Apple to reduce its margins on hardware and gain enough in sales as a result to counter that loss. Which is why it's using alternative approaches like the bricks and mortar stores.
[ 11-28-2001: Message edited by: Belle ]</strong><hr></blockquote>
as always, interesting anaylsis Belle.
but, the one thing that your reasoning doesn't take into account is that apple's desktops suck and if they actually made half decent speced ones desktops sales would go back to old levels and then perhaps a price cut could happen
<strong>but, the one thing that your reasoning doesn't take into account is that apple's desktops suck and if they actually made half decent speced ones desktops sales would go back to old levels and then perhaps a price cut could happen</strong><hr></blockquote>
It's going to be very hard to do, though. Dell's margin is lower because it has a larger market share, not the other way round. If Apple releases a Power Mac G5 similar to the dream machines that seem to be filling Future Hardware, I seriously doubt it would increase sales. They could announce a 3GHz chip, and I doubt it would change anything. Why? Because a 2GHz Pentium will do most jobs just as well, and the hardware will undoubtedly be cheaper.
The only way for Apple to increase market share is to offer something which you can't get from Windows-based hardware, and that's not raw speed. If the rumors of software-based realtime rendering in the next version of Final Cut Pro, all of a sudden Apple has an "in" into that market, because the overall cost of the solution will be cheaper than the competition. It's this approach that will increase Apple's share and allow it to perhaps start reducing some margins.
The only other way for Apple to compete with Windows-based hardware manufacturers is to become one itself. Even then, it's going to have to provide something that you can't get from Dell - perhaps iMovie and iTunes and a fancy case? These would increase R&D costs, and once again Apple would need to have higher margins.
Unless Apple is suddenly going to announce in January that it's dropping the G4 in favor of its new... uh... quantum processor, the only way for it to increase market share (Allowing it to lower margins) is for it to provide "technology packages" like iMovie + FireWire video cameras, iTunes + iPod, iDVD + DVD-R, and dual-processing/AltiVec + Final Cut Pro.
The extra money you pay to cover that margin gives you the unique platform that you say "suck[s]". If you want something that matches Wintel performance levels, go buy a Dell. If you want something which outperforms Wintel machines, prepare to pay more to cover the increased cost of sales and R&D budget.
I think we may see price increases, but no chance in hell of price cuts.
The G5 powermacs will cost more than the current G4 powermacs. You can count on it.</strong><hr></blockquote>
why? the G3s cost less than the 9600, the G4 cost less than the G3. and so on. it would not be wise to raise prices. if anything they should go 1599, 1999, 2499, 2999. back to 4 models.
I hope they keep prices the same on the new G5s at MWSF. But hopefully including more features. More RAM and HD, better video etc, more than just the usual bump.
Comments
I'm a little ambivalent about this issue. On the one hand, we have the marketshare issue which translates into inertia. Once you switch platforms, it's relatively hard to switch back. I'll give Apple a point on this one. On the other, if Apple starts getting into what appears to be a price war with box makers like Dell, Apple will lose. A point against cutting prices. Right now, Apple's got the boutique mystique. Once they cut their prices, they lose that mystique. So, it's a tossup for me. Either way, I think that Apple's doing ok. We all know that the current iMacs are just to bide time until the next Big One comes out. They spread their kickass machines over quarters so that they don't blow their wad all at once. They can remain profitable from quarter to quarter rather than having one huge quarter followed by several so-so quarters. In the current economy, having consistent performance is more important than having a blockbuster quarter followed by nothing.
As I said before, Apple's plans were shot to hell when the cube flopped. That was supposed to be the Machine for the Sept. quarter. It didn't happen and they had nothing to show for the January quarter either. Now, they've had two good quarters (the TiBook, followed by the iBook) and a so-so one (this quarter will be unless the iPod miraculously does it, which I doubt). Next, we'll see the iMacs (at MWSF or thereabouts) followed by the PowerMacs (at MWTY, Seybold or MWNY). This is the way I see it, at least, IMHO.
Now, how marketshare will help a company like Dell which can't benefit from the inertia of OS switching is beyond me.
About the increase over last year's spending: bad comparison. Year-over-year comparisons to last year's Jan quarter will look rosy too, eventhough the economy sucks. Last November, we had already begun to see the consumer confidence drop leading to the lower spending. A better comparison would be one like % of household income spent or something like that. Anyway, my 2¢.
They have higher R&D and production costs than say Gateway or Dell, so their computers would still cost more, but I would be interested if anyone could show just where the profit margins of each of the major OEMs are at.
<strong>Although it is a widely held belief that Apple's margins are higher than everyone else's, are they really? I was of the understanding a year or so ago before the price wars set in that Apple's were not the highest and were in line with most others.
They have higher R&D and production costs than say Gateway or Dell, so their computers would still cost more, but I would be interested if anyone could show just where the profit margins of each of the major OEMs are at.</strong><hr></blockquote>
Apple has the highest profit margins in the industry by far. Their profit margins have actually GONE UP in this supposed "economic downturn". last quarter they were right around 30%!!!!
I think Apple could give us buyers a big break and still not get into the cheap PC level. The $1699 PowerMac would be much better accepted in the market if it:
A. Included a 17" Flat Panel Display
B. Was $1299
C. It actually had good specs
Unfotunately, from a technical standpoint, the entry level G4 is a budget PC specwise and a high end PC pricewise. One thing that is often overlooked when we compare Macs to other computers is the fact that many other manufacturers include a monitor, and a nice one at that. Not some 15" piece of crap.
<strong>How do you find this stuff out, Applenut?
</strong><hr></blockquote>
it's in their quarterly reports.
<strong>Apple has the highest profit margins in the industry by far. Their profit margins have actually GONE UP in this supposed "economic downturn". last quarter they were right around 30%!!!!</strong><hr></blockquote>
Yes, but that figure of 30% is Apple's gross margin - that is all profits made on sales before it's operating expenses are taken into account. One such operating expense is research and development which, as Apple designs and develops its own hardware and software, is quite substantial.
In the year to 29 September 2001, Apple's gross margin was $1,235 million on net sales of $5,363 million (Around 23%). It's admin and R&D over that period totalled $1,579 million, for a net operating loss of $344 million.
As a comparison, Dell's gross margin over the same period was $1,313 million on net sales of $7,468 million (Around 17.5%), but its admin and R&D totalled only $769 million (Half that of Apple), for a net operating income of $429 million.
As things stand, there is no way for Apple to reduce its margins on hardware and gain enough in sales as a result to counter that loss. Which is why it's using alternative approaches like the bricks and mortar stores.
[ 11-28-2001: Message edited by: Belle ]</p>
<strong>
Yes, but that figure of 30% is Apple's gross margin - that is all profits made on sales before it's operating expenses are taken into account. One such operating expense is research and development which, as Apple designs and develops its own hardware and software, is quite substantial.
In the year to 29 September 2001, Apple's gross margin was $1,235 million on net sales of $5,363 million (Around 23%). It's admin and R&D over that period totalled $1,579 million, for a net operating loss of $344 million.
As a comparison, Dell's gross margin over the same period was $1,313 million on net sales of $7,468 million (Around 17.5%), but its admin and R&D totalled only $769 million (Half that of Apple), for a net operating income of $429 million.
As things stand, there is no way for Apple to reduce its margins on hardware and gain enough in sales as a result to counter that loss. Which is why it's using alternative approaches like the bricks and mortar stores.
[ 11-28-2001: Message edited by: Belle ]</strong><hr></blockquote>
as always, interesting anaylsis Belle.
but, the one thing that your reasoning doesn't take into account is that apple's desktops suck and if they actually made half decent speced ones desktops sales would go back to old levels and then perhaps a price cut could happen
I think we may see price increases, but no chance in hell of price cuts.
The G5 powermacs will cost more than the current G4 powermacs. You can count on it.
<strong>but, the one thing that your reasoning doesn't take into account is that apple's desktops suck and if they actually made half decent speced ones desktops sales would go back to old levels and then perhaps a price cut could happen</strong><hr></blockquote>
It's going to be very hard to do, though. Dell's margin is lower because it has a larger market share, not the other way round. If Apple releases a Power Mac G5 similar to the dream machines that seem to be filling Future Hardware, I seriously doubt it would increase sales. They could announce a 3GHz chip, and I doubt it would change anything. Why? Because a 2GHz Pentium will do most jobs just as well, and the hardware will undoubtedly be cheaper.
The only way for Apple to increase market share is to offer something which you can't get from Windows-based hardware, and that's not raw speed. If the rumors of software-based realtime rendering in the next version of Final Cut Pro, all of a sudden Apple has an "in" into that market, because the overall cost of the solution will be cheaper than the competition. It's this approach that will increase Apple's share and allow it to perhaps start reducing some margins.
The only other way for Apple to compete with Windows-based hardware manufacturers is to become one itself. Even then, it's going to have to provide something that you can't get from Dell - perhaps iMovie and iTunes and a fancy case? These would increase R&D costs, and once again Apple would need to have higher margins.
Unless Apple is suddenly going to announce in January that it's dropping the G4 in favor of its new... uh... quantum processor, the only way for it to increase market share (Allowing it to lower margins) is for it to provide "technology packages" like iMovie + FireWire video cameras, iTunes + iPod, iDVD + DVD-R, and dual-processing/AltiVec + Final Cut Pro.
The extra money you pay to cover that margin gives you the unique platform that you say "suck[s]". If you want something that matches Wintel performance levels, go buy a Dell. If you want something which outperforms Wintel machines, prepare to pay more to cover the increased cost of sales and R&D budget.
[ 11-29-2001: Message edited by: Belle ]</p>
<strong>
I think we may see price increases, but no chance in hell of price cuts.
The G5 powermacs will cost more than the current G4 powermacs. You can count on it.</strong><hr></blockquote>
why? the G3s cost less than the 9600, the G4 cost less than the G3. and so on. it would not be wise to raise prices. if anything they should go 1599, 1999, 2499, 2999. back to 4 models.
<strong>
I think we may see price increases, but no chance in hell of price cuts.
The G5 powermacs will cost more than the current G4 powermacs. You can count on it.</strong><hr></blockquote>
Yeah but the G4s are so overpriced I can't see the price go up because of the G5.