Neither you nor anyone else said anything to convince me that they would cannibalise sales of the iMac any more significantly than the current Mac Mini.
Well......there is a glaring reason for that. Unless you already have a monitor and keyboard it makes little sense to buy the Mac mini.
The mini offers few of the advantages of the iMac or MacPro.
I have admitted the xMac I propose for $1699 will cut into the 24" iMac and MacPro sales. Obviously a Mac with discreet graphics and PCI open PCI slots will offer competition against these models.
I know for sure my xMac proposal would cut into MacPro sales and probably sell better than the MacPro. That is why Apple should position and price such a computer just under the Mac Pro.
Damn right! Your costings are way off. You must have missed the fact that we know Apple's gross margins on computers are around the 28% point.
Ah, as usual Mr. H, you are correct. I believe my costs are for completed components in the computer, such as a finished motherboard, completed mechanical parts for the enclosure, and so on. Manufacturing cost would also include all assembly costs, testing and other direct labor charges. This would still be less than the cost on which gross margins are calculated, which typically include all direct sales cost, distribution and other direct costs. So please forgive me for the error; it was an early job I had, before switching careers.
For those reading who are unfamiliar with direct and indirect costs, a direct cost is associated with a particular product sold, such as a commission. TV advertising would usually be an indirect marketing cost not include in the product cost. There are few hard and fast rule how a company does it, just so it is done consistently.
Regardless of which of those three cost we use, however, the result will be the same. The tower can sell for $75 dollars less than the iMac I chose, the 17 inch at $1199. The performance would be comparable, but it would have the advantage of a replaceable graphics card and another HDD bay.
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I understand your proposal that the gross margin of the mini tower could be increased such that the absolute $ profit is the same as that achieved by the iMac, but, as Vinea points out, you then ignore the fact that price comparisons to the competition would then be seriously dire.
Here I must disagree with you, on the second point, that the tower would be priced too high to compete. This is what you mean, right?
I don't want to approach this with price examples on the Windows side, but let's just consider how switchers and Mac users would look at it. Obviously, the $1199 iMac is selling, so customers are reasonably satisfied with the price for its performance and features.
What you are saying is that few people would buy the same performance and features in a mini tower that sells for less, $1124, because it does not have a 17 inch monitor to go with it. I believe this follows logically, unless you say a tower must sell for a lot less just because it is a tower. I never did follow that argument at all, and I don't believe you ever said it either. Others have however.
I believe many would choose the tower for $1124. They can pick up a pretty good 17 inch LCD for $150. So for the extra $75 they pay, the buyer gets probably 3 PCI-e expansion slots, an easily replaceable graphics card, an extra HDD bay, and likely a form of computer the buyer prefers.
Now, if someone wants to do the comparison using a 20 inch iMac, the tower would be cheaper yet compared to the iMac because the 20 LCD panel costs more. However, the end result, the price of the tower with comparable performance, shouldn't change.
Now, what am I missing? I doubt that anyone who likes a tower would think twice about that choice. Not only would a tower be superior for these buyers, but they can choose a model or configuration with even higher performance and better features, for an appropriately high price.
I've been hit pretty hard on some of my ideas, which I don't mind. If there are truly valid points where I am way off base I want to know about them. Yet so far, I have not been convinced I'm wrong. As you may have guess by now, I don't knuckle under easily.
The tower can sell for $75 dollars less than the iMac I chose, the 17 inch at $1199.
And if I were your average switcher looking to get a Mac, I would see the iMac that looks cooler and has a monitor for only $75 more and NOT buy the tower.
That's my main concern - not cannibalization so much, but just the fact that if you price the tower at or slightly below the iMac, nobody will buy it. Cube Revisited. Apple will not be thrilled about that.
Of course if you DO price the tower low enough so that adding a 17" monitor is in total cheaper than the iMac, THEN it will cannibalize the iMac because it is cheaper. Apple does not get thrilled about that either.
I think that sums up my explanation of why Apple has not put a headless machine in the lineup. There is no place to put it.
I think that sums up my explanation of why Apple has not put a headless machine in the lineup. There is no place to put it.
There are a lot of people in this thread that disagree with that. I personally feel a $1500 tower wouldn't be a cube all over again. It would be like the low end powermacs in the g3 and g4 days. Every powermac started at 1500. Not $2200. That is 700 more than the oldschoolers were used to buying low end powermacs. About every 2-3 years I was buying a new powermac. Actually this trend started with me in 1993 when I bought a powermac 6100 for 1500. Up until the dual 2.0 g5 I bought for 2k in 2004. Every mac I bought between those dates were towers and between 1500 and 2000. These were well selling machines. All of this seemed to change with the switch to IBM... the 1500 dollar tower seemed to disappear! Why? Probably because the cpu's skyrocketed in price. That is about all I can think of. Or apple wanted more profit?
Well, I do hope that you guys who would want the slots and the bays get them. They had a single 1.8 G5 up there as well as a single 1.6 and they both got discontinued very soon because everybody either went for the iMac or the dual PowerMacs.
As for the $1500 tower, that's the price of the 20-inch iMac. It doesn't matter if it cannibalizes at that price, but it won't sell, as people will go for the small footprint and included 20-inch LCD for the same price.
For what it's worth, I myself would never buy an AIO because I am like you and want the expandability. Surprised? It costs me more for the Mac Pro but that is what I am going to get. OF course I am not the average home user.
I'm waiting for MWSF... do I think anything will come out there? Not at all. But at this point i might as well wait. When the xMac isn't released.. I'll suck it up... and order a mac pro... *throws money at apple to watch them pick it off the floor as I walk out the door WITH MY SERVER HARDWARE IN A TOWER DESIGN*
I have no interest in trying to convince you that the $399 - $799 models I propose (which would have laptop CPU and RAM, don't forget) wouldn't severely cannibalise iMac sales. We already know the situation. You think cannibalisation would happen to a significant degree, I don't.
Right, we agree to disagree on that point. If you are correct then your model makes sense. If not then it doesn't. Since there's no real way to tell unless Apple tries there's no point in spinning in circles again. IMHO they'd have to bet the farm and go whole hog on the strategy. Win and you get more desktop share and perhaps get into the Dell and HP ranges. Lose and they end up like Gateway (#3 but not very healthy).
There is the other point we disagree on is that I don't feel that Apple has the right corporate mindset (or leadership) to compete well in the $399 PC market and that it would have a negative impact to the brand unless done very well. You point out the iPod as a counter example. Which is well and good but I consider the iPod line, even the most inexpensive shuffle, to be on the elite end of the MP3 player spectrum. Eh. They show they can be a market leader but even in the iPod launch Jobs noted there was no current MP3 player market leader...which made that a lot easier.
That's why I lean toward tablets, ITV and other potential markets with no current market leaders.
I don't want to approach this with price examples on the Windows side,
That's because if you actually looked at the pricing there isn't much rebuttal you can make. They look really bad.
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but let's just consider how switchers and Mac users would look at it. Obviously, the $1199 iMac is selling, so customers are reasonably satisfied with the price for its performance and features.
And form factor. There is a certain elegance to a AIO and if you want to be different from the pack it certainly makes that statement.
But it is style over substance...something branding can let you get away with IF the direct comparisons aren't easily made.
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I believe many would choose the tower for $1124. They can pick up a pretty good 17 inch LCD for $150. So for the extra $75 they pay, the buyer gets probably 3 PCI-e expansion slots, an easily replaceable graphics card, an extra HDD bay, and likely a form of computer the buyer prefers.
No...not for an extra $75 but an extra $250 and a smaller monitor.
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Now, if someone wants to do the comparison using a 20 inch iMac, the tower would be cheaper yet compared to the iMac because the 20 LCD panel costs more. However, the end result, the price of the tower with comparable performance, shouldn't change.
Actually your best case is the 17" as the competing towers have roughly the same CPU but a smaller monitor but is now almost $500 cheaper or 50% cheaper. Granted the 20" is a WS so the cheap 19" monitor being offered is much smaller but the cost difference between a 20" WS dell and 20" ACD is significant.
But that's not what folks see...they see free 19" vs nothing, $900 vs $1400 and the same CPU, memory and HD. Even worse they see either a 20" WS display for $1028 or a 24" WS display for $1368.
Going Apple would cost them either $2100 ($1400 your tower + $699 for a 20" ACD) or $2400 ($999 for a 23" ACD). Even using the 17" iMac as the base price is unpalatable...$1900 or $2100.
It gets worse...Dell actually gives you $160 credit if you go no monitor...so you can get the Dell with the 30" WS display ($1275) for the same price as your tower with 20" ACD (around $2K total).
Major suckage.
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I've been hit pretty hard on some of my ideas, which I don't mind. If there are truly valid points where I am way off base I want to know about them. Yet so far, I have not been convinced I'm wrong. As you may have guess by now, I don't knuckle under easily.
Knuckle under or not your logic is still flawed and I'll still continue to pick them apart.
I'm waiting for MWSF... do I think anything will come out there? Not at all. But at this point i might as well wait. When the xMac isn't released.. I'll suck it up... and order a mac pro... *throws money at apple to watch them pick it off the floor as I walk out the door WITH MY SERVER HARDWARE IN A TOWER DESIGN*
Well...there may not be an xMac but hopefully there will be a cheaper Pro. It should at least be $300-$400 cheaper based on previous G5 towers. Who knows maybe a cube...
And if I were your average switcher looking to get a Mac, I would see the iMac that looks cooler and has a monitor for only $75 more and NOT buy the tower.
Depend on what you want. A tower with a decent 17 inch LCD display for $1274, or a 17 inch iMac for $1199 -- otherwise, comparable performance and features. The PCI-e slots, extra drive bay, replaceable graphics card -- all together these are worth more than $75 to many of us.
As far as the iMac looking cooler, I have great faith in Apple's industrial design team. I think a mini tower from Apple would look great, and be bate to lure switcher's.
And if I were your average switcher looking to get a Mac, I would see the iMac that looks cooler and has a monitor for only $75 more and NOT buy the tower.
That's your choice and it's perfectly fine. But I think Apple should let the consumer decide. Right now they're making the decision for them.
Well...there may not be an xMac but hopefully there will be a cheaper Pro. It should at least be $300-$400 cheaper based on previous G5 towers. Who knows maybe a cube...
Vinea
How about just releasing a Mac Pro with a Core 2 Duo chip instead of Dual Xeons? Start the price at $1,999, and you've got my money.
How about just releasing a Mac Pro with a Core 2 Duo chip instead of Dual Xeons? Start the price at $1,999, and you've got my money.
Sure. Why not. The only caveat I've had with that is that it's a lot simpler for Apple to simply remove a Woodcrest than build a new MB and Conroe line. Plus they get to maintain their server part volume if not increase it a bit.
Other than the FB-DIMM slowdown a single 3Ghz Woodcrest isn't a shabby machine...
I have already suggested that my proposal would impact negatively on revenue and earnings for the first year or so, but in a minor fashion, and then start to impact positively. I don't believe iMac cannibalisation would be so severe that there would be no point producing it any more.
I got curious so I took 5 mins and ran it through excel.
Assumptions:
2M desktop units a year to start
12%/year growth rate for desktops under Mr. H's product lineup (based on Apple's current growth which is pretty good)
0%/year growth rate for desktops under current product lineup
$499 bottom end machine (vs $399)
$1400 current avg unit price (from that article linked a few pages ago)
50% budget machine sale mix (from another article that said the desktop market was 50% entry machines).
$950 new avg unit price - ($1400 + $500)/2. The assumption is that half the machines would be cannibalized but the remaining half of the machines keep Apple's current average.
So the baseline is: 2M units per year * $1400 avg price * 0.28 margin = $784M
Results: Year, # units, gross profit, delta from baseline, running delta from baseline
1 - 2.24M units, $595M, (-188M), (-188M)
2 - 2.5M units, $667M, (-116M), (-304M)
3 - 2.8M units, $747M, (-36M), (-341M)
4 - 3.14M units, $837M, 53M, (-288M)
5 - 3.52M units, $937M, 153M, (-134M)
6 - 3.9M units, $1,050M, 266M, 131M
7 - 4.4M units, $1,176M, 392M, 523M
8 - 4.9M units, $1,317M, 533M, 1,056M
9 - 5.5M units, $1,475M, 691M, 1,747M
10 - 6.2M units, $1,652M, 868M, 2,616M
So for the first 3 years you make less money after which you make up the difference. For 5 years you're negative overall but year 6 forward you make more money. Lots more money by year 10...and like all such growth patterns it accelerates.
Assuming you can maintain 12% annual growth over 10 years. Give Apple any growth with their current line up and the years gets pushed outwards a bit. About a year per percentage point of average growth. 4% growth pushes breakeven out to year 9.
Very back of the envelope via Excel but you see the general pattern. Sure, if you can maintain the growth eventually you make massive bucks. But it'll be half a decade, not one year, of running in the red. Year 3 is the worst where you are $344M in the hole. One thing is for sure...if Apple adopts this strategy sell your shares...the first year will be nothing but "Apple profits stunted despite increased sales" reports. Buy it back when the stock bottoms.
Change some assumptions, move the years and $$$ around a little. The key will be sustained growth rate.
Mmm...I dunno. I don't think Apple can maintain 12% growth even in the laptop space for 5 years. We had a banner year because of pent up demand. We'll likely get another in 2007 from iPod/iPhone halo and pent up Mac Pro demand.
After that?
It seems to require Dell, HP and Gateway not responding effectively. For a decade. Huh.
Microsoft could also impact the desktop space. Imagine if MS made a "Pro" version of the 360 and sold MS Office as a $200 "game" for it? The 360 makes a heck of a thin client. It's already a MCE.
So parents don't have to buy a desktop computer and a console...just a 360. MS can tout reduced TCO to businesses because of the "new" thin client architecture. Big Windows servers in the back, thrifty user (and virus) safe consoles in the front. Ellison gnashes his teeth as MS beats Oracle to the network computer. Intel has kittens.
Too gutsy for MS and too fraught with danger. But 10 years is a long time to not expect some paradigm shift. We're overdue I think.
"0 new avg unit price - ($1400 + $500)/2. The assumption is that half the machines would be cannibalized but the remaining half of the machines keep Apple's current average."
No way will a $499 machine cannibalize half of the iMac sales. A low end machine in the $499 range might add sales or cannibailze Mac mini sales, but no way would half the buyers of iMacs buy this machine.
"0 new avg unit price - ($1400 + $500)/2. The assumption is that half the machines would be cannibalized but the remaining half of the machines keep Apple's current average."
No way will a $499 machine cannibalize half of the iMac sales. A low end machine in the $499 range might add sales or cannibailze Mac mini sales, but no way would half the buyers of iMacs buy this machine.
As I said, change your assumptions change the outcomes. I picked that because it was easy and I didn't know the current mix of mini and iMacs.
But let me put this out there:
First we can probably agree that most mini sales will go to the new xMac $399-$1499 lineup. I padded the number by $100 to $499 rather than pick the $399 number.
Most of the 12% growth will be from the xMac. It probably isn't unreasonable to say half will be in the $500 category since that's an industry average. Even if you disagree it isn't unreasonable to assume that the majority lives under that $950 average unit price.
Apple is rumored to be doing some AMD chips. That seems silly to me unless the Intel supply hiccup is more than a temporary glitch but you can do a AMD X2 for cheap...within the $399 pricepoint (Dell's slim tower C521 is a AMD64 X2 3200 for $371). That's not too shabby a machine...probably as good as the current low end minis when you factor in the faster desktop drive performance.
You can do a Conroe 1.86Ghz with GMA X3000 (hey these are out? I guess it's the mobile version that isn't yet) for $599 (the E520 just dropped in price today...no free monitor though). These will trash your 17" $999 iMac sales. They won't do a whole lot for your $1299 17" iMac sales either. I'm guessing we're being a bit generous here with only 50% cannibalization of these two AIO models...
The Dell 2.13 Conroe is now $649 (no monitor). The Apple version will be around $700-$750. This isn't going to do much for your 20" or 24" iMac sales.
The bulk of your sales will likely be in that $700 2.13 Conroe tower. You'll likely lose a few Pro sales to a $1200-$1400 higher speed Conroe from Mr. H's lineup which will push average price down a tad.
So that $950 average unit price doesn't look so terrible despite originally being a rough formula dumbed down for simplicity's sake. Move it up a little if you like but you probably can't move it up by that much. Add in some monitor sales and the numbers get better but its still not just a 1 year hit. All the other stats I think are generous to Mr. H.
0% desktop growth vs 12% is the most important assumption. Any slump there and the breakeven dates change a lot more than fiddling with the other numbers.
As I said, change your assumptions change the outcomes. I picked that because it was easy and I didn't know the current mix of mini and iMacs.
But let me put this out there:
First we can probably agree that most mini sales will go to the new xMac $399-$1499 lineup. I padded the number by $100 to $499 rather than pick the $399 number.
Most of the 12% growth will be from the xMac. It probably isn't unreasonable to say half will be in the $500 category since that's an industry average. Even if you disagree it isn't unreasonable to assume that the majority lives under that $950 average unit price.
Apple is rumored to be doing some AMD chips. That seems silly to me unless the Intel supply hiccup is more than a temporary glitch but you can do a AMD X2 for cheap...within the $399 pricepoint (Dell's slim tower C521 is a AMD64 X2 3200 for $371). That's not too shabby a machine...probably as good as the current low end minis when you factor in the faster desktop drive performance.
You can do a Conroe 1.86Ghz with GMA X3000 (hey these are out? I guess it's the mobile version that isn't yet) for $599 (the E520 just dropped in price today...no free monitor though). These will trash your 17" $999 iMac sales. They won't do a whole lot for your $1299 17" iMac sales either. I'm guessing we're being a bit generous here with only 50% cannibalization of these two AIO models...
The Dell 2.13 Conroe is now $649 (no monitor). The Apple version will be around $700-$750. This isn't going to do much for your 20" or 24" iMac sales.
The bulk of your sales will likely be in that $700 2.13 Conroe tower. You'll likely lose a few Pro sales to a $1200-$1400 higher speed Conroe from Mr. H's lineup which will push average price down a tad.
So that $950 average unit price doesn't look so terrible despite originally being a rough formula dumbed down for simplicity's sake. Move it up a little if you like but you probably can't move it up by that much. Add in some monitor sales and the numbers get better but its still not just a 1 year hit. All the other stats I think are generous to Mr. H.
0% desktop growth vs 12% is the most important assumption. Any slump there and the breakeven dates change a lot more than fiddling with the other numbers.
Vinea
Vinea,
I know I'm a bit late to the discussion but why position the new tower at the low end? Wouldn't it make more sense positioned as a 'prosumer' machine? Say with a 2.4 ghz conroe and a 2.6 ghz conroe one expansion slot and priced starting at say $1200 USD. (I know I've not put in all the specs)
Comments
Neither you nor anyone else said anything to convince me that they would cannibalise sales of the iMac any more significantly than the current Mac Mini.
Well......there is a glaring reason for that. Unless you already have a monitor and keyboard it makes little sense to buy the Mac mini.
The mini offers few of the advantages of the iMac or MacPro.
I have admitted the xMac I propose for $1699 will cut into the 24" iMac and MacPro sales. Obviously a Mac with discreet graphics and PCI open PCI slots will offer competition against these models.
I know for sure my xMac proposal would cut into MacPro sales and probably sell better than the MacPro. That is why Apple should position and price such a computer just under the Mac Pro.
Damn right! Your costings are way off. You must have missed the fact that we know Apple's gross margins on computers are around the 28% point.
Ah, as usual Mr. H, you are correct. I believe my costs are for completed components in the computer, such as a finished motherboard, completed mechanical parts for the enclosure, and so on. Manufacturing cost would also include all assembly costs, testing and other direct labor charges. This would still be less than the cost on which gross margins are calculated, which typically include all direct sales cost, distribution and other direct costs. So please forgive me for the error; it was an early job I had, before switching careers.
For those reading who are unfamiliar with direct and indirect costs, a direct cost is associated with a particular product sold, such as a commission. TV advertising would usually be an indirect marketing cost not include in the product cost. There are few hard and fast rule how a company does it, just so it is done consistently.
Regardless of which of those three cost we use, however, the result will be the same. The tower can sell for $75 dollars less than the iMac I chose, the 17 inch at $1199. The performance would be comparable, but it would have the advantage of a replaceable graphics card and another HDD bay.
I understand your proposal that the gross margin of the mini tower could be increased such that the absolute $ profit is the same as that achieved by the iMac, but, as Vinea points out, you then ignore the fact that price comparisons to the competition would then be seriously dire.
Here I must disagree with you, on the second point, that the tower would be priced too high to compete. This is what you mean, right?
I don't want to approach this with price examples on the Windows side, but let's just consider how switchers and Mac users would look at it. Obviously, the $1199 iMac is selling, so customers are reasonably satisfied with the price for its performance and features.
What you are saying is that few people would buy the same performance and features in a mini tower that sells for less, $1124, because it does not have a 17 inch monitor to go with it. I believe this follows logically, unless you say a tower must sell for a lot less just because it is a tower. I never did follow that argument at all, and I don't believe you ever said it either. Others have however.
I believe many would choose the tower for $1124. They can pick up a pretty good 17 inch LCD for $150. So for the extra $75 they pay, the buyer gets probably 3 PCI-e expansion slots, an easily replaceable graphics card, an extra HDD bay, and likely a form of computer the buyer prefers.
Now, if someone wants to do the comparison using a 20 inch iMac, the tower would be cheaper yet compared to the iMac because the 20 LCD panel costs more. However, the end result, the price of the tower with comparable performance, shouldn't change.
Now, what am I missing? I doubt that anyone who likes a tower would think twice about that choice. Not only would a tower be superior for these buyers, but they can choose a model or configuration with even higher performance and better features, for an appropriately high price.
I've been hit pretty hard on some of my ideas, which I don't mind. If there are truly valid points where I am way off base I want to know about them. Yet so far, I have not been convinced I'm wrong. As you may have guess by now, I don't knuckle under easily.
The tower can sell for $75 dollars less than the iMac I chose, the 17 inch at $1199.
And if I were your average switcher looking to get a Mac, I would see the iMac that looks cooler and has a monitor for only $75 more and NOT buy the tower.
That's my main concern - not cannibalization so much, but just the fact that if you price the tower at or slightly below the iMac, nobody will buy it. Cube Revisited. Apple will not be thrilled about that.
Of course if you DO price the tower low enough so that adding a 17" monitor is in total cheaper than the iMac, THEN it will cannibalize the iMac because it is cheaper. Apple does not get thrilled about that either.
I think that sums up my explanation of why Apple has not put a headless machine in the lineup. There is no place to put it.
That was uncalled for
Yep. Ad hominem attacks are not tolerated.
I think that sums up my explanation of why Apple has not put a headless machine in the lineup. There is no place to put it.
There are a lot of people in this thread that disagree with that. I personally feel a $1500 tower wouldn't be a cube all over again. It would be like the low end powermacs in the g3 and g4 days. Every powermac started at 1500. Not $2200. That is 700 more than the oldschoolers were used to buying low end powermacs. About every 2-3 years I was buying a new powermac. Actually this trend started with me in 1993 when I bought a powermac 6100 for 1500. Up until the dual 2.0 g5 I bought for 2k in 2004. Every mac I bought between those dates were towers and between 1500 and 2000. These were well selling machines. All of this seemed to change with the switch to IBM... the 1500 dollar tower seemed to disappear! Why? Probably because the cpu's skyrocketed in price. That is about all I can think of. Or apple wanted more profit?
As for the $1500 tower, that's the price of the 20-inch iMac. It doesn't matter if it cannibalizes at that price, but it won't sell, as people will go for the small footprint and included 20-inch LCD for the same price.
For what it's worth, I myself would never buy an AIO because I am like you and want the expandability. Surprised? It costs me more for the Mac Pro but that is what I am going to get. OF course I am not the average home user.
I have no interest in trying to convince you that the $399 - $799 models I propose (which would have laptop CPU and RAM, don't forget) wouldn't severely cannibalise iMac sales. We already know the situation. You think cannibalisation would happen to a significant degree, I don't.
Right, we agree to disagree on that point. If you are correct then your model makes sense. If not then it doesn't. Since there's no real way to tell unless Apple tries there's no point in spinning in circles again. IMHO they'd have to bet the farm and go whole hog on the strategy. Win and you get more desktop share and perhaps get into the Dell and HP ranges. Lose and they end up like Gateway (#3 but not very healthy).
There is the other point we disagree on is that I don't feel that Apple has the right corporate mindset (or leadership) to compete well in the $399 PC market and that it would have a negative impact to the brand unless done very well. You point out the iPod as a counter example. Which is well and good but I consider the iPod line, even the most inexpensive shuffle, to be on the elite end of the MP3 player spectrum. Eh. They show they can be a market leader but even in the iPod launch Jobs noted there was no current MP3 player market leader...which made that a lot easier.
That's why I lean toward tablets, ITV and other potential markets with no current market leaders.
Vinea
I don't want to approach this with price examples on the Windows side,
That's because if you actually looked at the pricing there isn't much rebuttal you can make. They look really bad.
but let's just consider how switchers and Mac users would look at it. Obviously, the $1199 iMac is selling, so customers are reasonably satisfied with the price for its performance and features.
And form factor. There is a certain elegance to a AIO and if you want to be different from the pack it certainly makes that statement.
But it is style over substance...something branding can let you get away with IF the direct comparisons aren't easily made.
I believe many would choose the tower for $1124. They can pick up a pretty good 17 inch LCD for $150. So for the extra $75 they pay, the buyer gets probably 3 PCI-e expansion slots, an easily replaceable graphics card, an extra HDD bay, and likely a form of computer the buyer prefers.
No...not for an extra $75 but an extra $250 and a smaller monitor.
Now, if someone wants to do the comparison using a 20 inch iMac, the tower would be cheaper yet compared to the iMac because the 20 LCD panel costs more. However, the end result, the price of the tower with comparable performance, shouldn't change.
Actually your best case is the 17" as the competing towers have roughly the same CPU but a smaller monitor but is now almost $500 cheaper or 50% cheaper. Granted the 20" is a WS so the cheap 19" monitor being offered is much smaller but the cost difference between a 20" WS dell and 20" ACD is significant.
But that's not what folks see...they see free 19" vs nothing, $900 vs $1400 and the same CPU, memory and HD. Even worse they see either a 20" WS display for $1028 or a 24" WS display for $1368.
Going Apple would cost them either $2100 ($1400 your tower + $699 for a 20" ACD) or $2400 ($999 for a 23" ACD). Even using the 17" iMac as the base price is unpalatable...$1900 or $2100.
It gets worse...Dell actually gives you $160 credit if you go no monitor...so you can get the Dell with the 30" WS display ($1275) for the same price as your tower with 20" ACD (around $2K total).
Major suckage.
I've been hit pretty hard on some of my ideas, which I don't mind. If there are truly valid points where I am way off base I want to know about them. Yet so far, I have not been convinced I'm wrong. As you may have guess by now, I don't knuckle under easily.
Knuckle under or not your logic is still flawed and I'll still continue to pick them apart.
Vinea
I'm waiting for MWSF... do I think anything will come out there? Not at all. But at this point i might as well wait. When the xMac isn't released.. I'll suck it up... and order a mac pro... *throws money at apple to watch them pick it off the floor as I walk out the door WITH MY SERVER HARDWARE IN A TOWER DESIGN*
Well...there may not be an xMac but hopefully there will be a cheaper Pro. It should at least be $300-$400 cheaper based on previous G5 towers. Who knows maybe a cube...
Vinea
And if I were your average switcher looking to get a Mac, I would see the iMac that looks cooler and has a monitor for only $75 more and NOT buy the tower.
Depend on what you want. A tower with a decent 17 inch LCD display for $1274, or a 17 inch iMac for $1199 -- otherwise, comparable performance and features. The PCI-e slots, extra drive bay, replaceable graphics card -- all together these are worth more than $75 to many of us.
As far as the iMac looking cooler, I have great faith in Apple's industrial design team. I think a mini tower from Apple would look great, and be bate to lure switcher's.
And if I were your average switcher looking to get a Mac, I would see the iMac that looks cooler and has a monitor for only $75 more and NOT buy the tower.
That's your choice and it's perfectly fine. But I think Apple should let the consumer decide. Right now they're making the decision for them.
Well...there may not be an xMac but hopefully there will be a cheaper Pro. It should at least be $300-$400 cheaper based on previous G5 towers. Who knows maybe a cube...
Vinea
How about just releasing a Mac Pro with a Core 2 Duo chip instead of Dual Xeons? Start the price at $1,999, and you've got my money.
How about just releasing a Mac Pro with a Core 2 Duo chip instead of Dual Xeons? Start the price at $1,999, and you've got my money.
Sure. Why not. The only caveat I've had with that is that it's a lot simpler for Apple to simply remove a Woodcrest than build a new MB and Conroe line. Plus they get to maintain their server part volume if not increase it a bit.
Other than the FB-DIMM slowdown a single 3Ghz Woodcrest isn't a shabby machine...
Vinea
I have already suggested that my proposal would impact negatively on revenue and earnings for the first year or so, but in a minor fashion, and then start to impact positively. I don't believe iMac cannibalisation would be so severe that there would be no point producing it any more.
I got curious so I took 5 mins and ran it through excel.
Assumptions:
- 2M desktop units a year to start
- 12%/year growth rate for desktops under Mr. H's product lineup (based on Apple's current growth which is pretty good)
- 0%/year growth rate for desktops under current product lineup
- $499 bottom end machine (vs $399)
- $1400 current avg unit price (from that article linked a few pages ago)
- 50% budget machine sale mix (from another article that said the desktop market was 50% entry machines).
- $950 new avg unit price - ($1400 + $500)/2. The assumption is that half the machines would be cannibalized but the remaining half of the machines keep Apple's current average.
So the baseline is: 2M units per year * $1400 avg price * 0.28 margin = $784MResults: Year, # units, gross profit, delta from baseline, running delta from baseline
1 - 2.24M units, $595M, (-188M), (-188M)
2 - 2.5M units, $667M, (-116M), (-304M)
3 - 2.8M units, $747M, (-36M), (-341M)
4 - 3.14M units, $837M, 53M, (-288M)
5 - 3.52M units, $937M, 153M, (-134M)
6 - 3.9M units, $1,050M, 266M, 131M
7 - 4.4M units, $1,176M, 392M, 523M
8 - 4.9M units, $1,317M, 533M, 1,056M
9 - 5.5M units, $1,475M, 691M, 1,747M
10 - 6.2M units, $1,652M, 868M, 2,616M
So for the first 3 years you make less money after which you make up the difference. For 5 years you're negative overall but year 6 forward you make more money. Lots more money by year 10...and like all such growth patterns it accelerates.
Assuming you can maintain 12% annual growth over 10 years. Give Apple any growth with their current line up and the years gets pushed outwards a bit. About a year per percentage point of average growth. 4% growth pushes breakeven out to year 9.
Very back of the envelope via Excel but you see the general pattern. Sure, if you can maintain the growth eventually you make massive bucks. But it'll be half a decade, not one year, of running in the red. Year 3 is the worst where you are $344M in the hole. One thing is for sure...if Apple adopts this strategy sell your shares...the first year will be nothing but "Apple profits stunted despite increased sales" reports. Buy it back when the stock bottoms.
Change some assumptions, move the years and $$$ around a little. The key will be sustained growth rate.
Mmm...I dunno. I don't think Apple can maintain 12% growth even in the laptop space for 5 years. We had a banner year because of pent up demand. We'll likely get another in 2007 from iPod/iPhone halo and pent up Mac Pro demand.
After that?
It seems to require Dell, HP and Gateway not responding effectively. For a decade. Huh.
Microsoft could also impact the desktop space. Imagine if MS made a "Pro" version of the 360 and sold MS Office as a $200 "game" for it? The 360 makes a heck of a thin client. It's already a MCE.
So parents don't have to buy a desktop computer and a console...just a 360. MS can tout reduced TCO to businesses because of the "new" thin client architecture. Big Windows servers in the back, thrifty user (and virus) safe consoles in the front. Ellison gnashes his teeth as MS beats Oracle to the network computer. Intel has kittens.
Too gutsy for MS and too fraught with danger. But 10 years is a long time to not expect some paradigm shift. We're overdue I think.
Vinea
"0 new avg unit price - ($1400 + $500)/2. The assumption is that half the machines would be cannibalized but the remaining half of the machines keep Apple's current average."
No way will a $499 machine cannibalize half of the iMac sales. A low end machine in the $499 range might add sales or cannibailze Mac mini sales, but no way would half the buyers of iMacs buy this machine.
Your biggest error is
"0 new avg unit price - ($1400 + $500)/2. The assumption is that half the machines would be cannibalized but the remaining half of the machines keep Apple's current average."
No way will a $499 machine cannibalize half of the iMac sales. A low end machine in the $499 range might add sales or cannibailze Mac mini sales, but no way would half the buyers of iMacs buy this machine.
As I said, change your assumptions change the outcomes. I picked that because it was easy and I didn't know the current mix of mini and iMacs.
But let me put this out there:
First we can probably agree that most mini sales will go to the new xMac $399-$1499 lineup. I padded the number by $100 to $499 rather than pick the $399 number.
Most of the 12% growth will be from the xMac. It probably isn't unreasonable to say half will be in the $500 category since that's an industry average. Even if you disagree it isn't unreasonable to assume that the majority lives under that $950 average unit price.
Apple is rumored to be doing some AMD chips. That seems silly to me unless the Intel supply hiccup is more than a temporary glitch but you can do a AMD X2 for cheap...within the $399 pricepoint (Dell's slim tower C521 is a AMD64 X2 3200 for $371). That's not too shabby a machine...probably as good as the current low end minis when you factor in the faster desktop drive performance.
You can do a Conroe 1.86Ghz with GMA X3000 (hey these are out? I guess it's the mobile version that isn't yet) for $599 (the E520 just dropped in price today...no free monitor though). These will trash your 17" $999 iMac sales. They won't do a whole lot for your $1299 17" iMac sales either. I'm guessing we're being a bit generous here with only 50% cannibalization of these two AIO models...
The Dell 2.13 Conroe is now $649 (no monitor). The Apple version will be around $700-$750. This isn't going to do much for your 20" or 24" iMac sales.
The bulk of your sales will likely be in that $700 2.13 Conroe tower. You'll likely lose a few Pro sales to a $1200-$1400 higher speed Conroe from Mr. H's lineup which will push average price down a tad.
So that $950 average unit price doesn't look so terrible despite originally being a rough formula dumbed down for simplicity's sake. Move it up a little if you like but you probably can't move it up by that much. Add in some monitor sales and the numbers get better but its still not just a 1 year hit. All the other stats I think are generous to Mr. H.
0% desktop growth vs 12% is the most important assumption. Any slump there and the breakeven dates change a lot more than fiddling with the other numbers.
Vinea
As I said, change your assumptions change the outcomes. I picked that because it was easy and I didn't know the current mix of mini and iMacs.
But let me put this out there:
First we can probably agree that most mini sales will go to the new xMac $399-$1499 lineup. I padded the number by $100 to $499 rather than pick the $399 number.
Most of the 12% growth will be from the xMac. It probably isn't unreasonable to say half will be in the $500 category since that's an industry average. Even if you disagree it isn't unreasonable to assume that the majority lives under that $950 average unit price.
Apple is rumored to be doing some AMD chips. That seems silly to me unless the Intel supply hiccup is more than a temporary glitch but you can do a AMD X2 for cheap...within the $399 pricepoint (Dell's slim tower C521 is a AMD64 X2 3200 for $371). That's not too shabby a machine...probably as good as the current low end minis when you factor in the faster desktop drive performance.
You can do a Conroe 1.86Ghz with GMA X3000 (hey these are out? I guess it's the mobile version that isn't yet) for $599 (the E520 just dropped in price today...no free monitor though). These will trash your 17" $999 iMac sales. They won't do a whole lot for your $1299 17" iMac sales either. I'm guessing we're being a bit generous here with only 50% cannibalization of these two AIO models...
The Dell 2.13 Conroe is now $649 (no monitor). The Apple version will be around $700-$750. This isn't going to do much for your 20" or 24" iMac sales.
The bulk of your sales will likely be in that $700 2.13 Conroe tower. You'll likely lose a few Pro sales to a $1200-$1400 higher speed Conroe from Mr. H's lineup which will push average price down a tad.
So that $950 average unit price doesn't look so terrible despite originally being a rough formula dumbed down for simplicity's sake. Move it up a little if you like but you probably can't move it up by that much. Add in some monitor sales and the numbers get better but its still not just a 1 year hit. All the other stats I think are generous to Mr. H.
0% desktop growth vs 12% is the most important assumption. Any slump there and the breakeven dates change a lot more than fiddling with the other numbers.
Vinea
Vinea,
I know I'm a bit late to the discussion but why position the new tower at the low end? Wouldn't it make more sense positioned as a 'prosumer' machine? Say with a 2.4 ghz conroe and a 2.6 ghz conroe one expansion slot and priced starting at say $1200 USD. (I know I've not put in all the specs)