Most software companies used to go this route, until piracy made most of them do incremental upgrades.
Some companies still do it. But, you have to pay full price for the program, and then send in the rebate coupon, which only works if you already own the product.
The first two that come to mind are Roxio (Toast), and Symantec (Anti-Virus).
Full upgrade eh? Okay, I'll buy that. Actually, I should, don't have iLife '06 yet.
MS, being primarily a software developer, has tremendous profits vs total sales. Extremely high margins, up to 80%.
This is the key difference, but you left out a word: "MS, being a monopoly software maker...". No other software firm has margins anywhere close to 80%, and most of the big firms make their money from support contracts, not retail sales. In terms of recouping development costs per unit, it wouldn't surprise me if Apple actually took an effective loss on each retail box of OS X and iLife, but made up for it with much higher absolute margins on their much higher volume of hardware sales.
There's really no other way for them to do it. According to their recent financials, sales of Mac hardware were $1.7B for the quarter, while "other" sales (which includes all Apple and non-Apple software as well as AppleCare and .Mac) totaled only 0.3B. Figure sales of boxed OS X are, generously, one-tenth of that figure. $30M in retail sales will not cover $100M+ in development costs. The hardware sales have to cover a fair portion of development, so including OS X (or iLife) with a Mac is not "free" for Apple. (Of course, these days iPods are subsidizing everything. ;P)
This is the key difference, but you left out a word: "MS, being a monopoly software maker...". No other software firm has margins anywhere close to 80%, and most of the big firms make their money from support contracts, not retail sales. In terms of recouping development costs per unit, it wouldn't surprise me if Apple actually took an effective loss on each retail box of OS X and iLife, but made up for it with much higher absolute margins on their much higher volume of hardware sales.
There's really no other way for them to do it. According to their recent financials, sales of Mac hardware were $1.7B for the quarter, while "other" sales (which includes all Apple and non-Apple software as well as AppleCare and .Mac) totaled only 0.3B. Figure sales of boxed OS X are, generously, one-tenth of that figure. $30M in retail sales will not cover $100M+ in development costs. The hardware sales have to cover a fair portion of development, so including OS X (or iLife) with a Mac is not "free" for Apple. (Of course, these days iPods are subsidizing everything. ;P)
Well, all big software houses have very large margins. I just depends on where the use them. MS's is somewhat larger than most others, nut not drastically so.
Apple makes a great deal of profit on its software, including OS X. This has been acknowledged by them more than once.
Apple sold almost $2 billion in software last year, and will sell more this year.
Your numbers are far off course. Last quarters total sales were $5,7+ billion.
Apple sells a $599 Intel Mini, for a profit, with the following specs:
Attractive casework
Core Solo processor
512 MB of laptop RAM
60 GB 5400 RPM laptop HD
DVD-ROM, CD-RW combo laptop optical drive
Integrated graphics
Wireless networking + Bluetooth
Apple Remote
Fact: Desktop RAM costs less than laptop RAM
From the iSupply iMac Core Duo this is currently $20/256MB. Total $40. Say you save half...$20.
Quote:
Fact: No wireless networking or bluetooth costs less than wireless networking and bluetooth.
I understand that the chipset is $5 apiece? Say you save $10.
Quote:
Fact: a 40 GB 3.5" hard drive costs a lot less than a 60 gig 5400 rpm laptop drive
Fact: A full-size CD-RW optical drive costs less than a combo laptop optical drive
Fact: No Apple remote costs less than an Apple remote
Fact: A bigger form-factor makes custom assembly quicker and therefore cheaper.
Even assuming the two items that add costs is $0 you have to show that these items represent $70 worth of savings to reach $499.
Quote:
a graphics card in the single available PCI-E slot (edit: just to make it clear, integrated graphics would be standard, a PCI-E graphics card would be an upgrade).
A MB larger case and power supply to support a PCI-E slot is not a $0 cost item.
I dunno that your assertion requires refuting as much as supporting with numbers. Yes, the deleted/downgraded items does represent a cost savings. How much?
Even assuming $0 increase for a slot and additional power your numbers are iffy to support a $100 price drop given that Shuttle SD11G5 bare-bone kits run $400 retail.
I understand that the chipset is $5 apiece? Say you save $10.
I'm thinking more like $15.
I appreciate that my working here is rather "hand-wavy". My thinking is: just look at the mini! Apple have managed to pull off, for $599, what other manufacturers are charging $999 for. It beggars belief that they would be unable to produce a cheap mini tower.
Quote:
Originally posted by vinea
Even assuming the two items that add costs is $0 you have to show that these items represent $70 worth of savings to reach $499.
This is incorrect. You are assuming that the component cost for the $599 mini is $599. It seems paradoxical, but you don't have to save $100 in component costs to reduce the retail price by $100 and maintain the margin.
e.g. assuming a 25% gross margin, the mini's component costs are $449.25
To have a $499 machine with a 25% gross margin, the component costs would be $374.35
Yes, buying the box will install on a system that does not have iLife installed, but (we discussed this on another thread), as iLife NOW comes bundled with every Mac, it is basically an upgrade users are paying for. Not for everyone, but newbies at least.
Quote:
However, there are a lot of people who don't consider ease of use, integrated software, lower learning curve as part of the costs making the Mac a better value rather than a cheaper system (lack of viruses is only until virus writers start writing 'em for the Mac). They just look at the bottom line -- what's going to be coming out of their wallets and make their decision off that.
Another parts it that people who buy systems already know how to work the programs they're going to use on any platform so that part also isn't a factor in the total cost.
Yes, in the long run, there'll be less headache running OS X than something else and less time will be spent hacking away at the OS. But most people don't think of this when buying a computer.
Well, paragraphs 1 and 3: if that is true, Mac user really ARE a different breed. I am glad I am not one of those "most people"
Paregraph 2: I don't agree... what about new users?
e.g. assuming a 25% gross margin, the mini's component costs are $449.25
Apple's component costs for this machine can't be more than about $300.
That might easily be too high. Then Apple has its costs + profit. It then sells the machines to the distributor.
Don't forget that Apple must sell these machines to the distributors for no more than about $450. They then have to add THEIR costs in to the price, plus their profit. They then sell the machine to the stores, who also have costs. They would also like to make a profit. Often they take $20 or so off list, give free memory, or a printer, free shipping, etc. That has to be accounted for as well.
Apple makes up for some of that on its own properties, including the web site. Apple sells about half of their stuff themselves, so you can calculate the average.
Yes, buying the box will install on a system that does not have iLife installed, but (we discussed this on another thread), as iLife NOW comes bundled with every Mac, it is basically an upgrade users are paying for. Not for everyone, but newbies at least.
Yeah, well, I guess that holds true now......but was just sayin'.....I think it was melgross that classified it as a full upgrade package. That works for me....
Quote:
Well, paragraphs 1 and 3: if that is true, Mac user really ARE a different breed. I am glad I am not one of those "most people"
What about potential switchers? They are not currently Mac users. I used the broad term "most people" because a lot of the threads I read (not just Mac-centric forums) I see people saying wow, nice computers, I would want one, but they're too expensive, I'll wait till the price comes down....
Quote:
Paregraph 2: I don't agree... what about new users?
Apple's component costs for this machine can't be more than about $300.
That might easily be too high. Then Apple has its costs + profit. It then sells the machines to the distributor.
Don't forget that Apple must sell these machines to the distributors for no more than about $450. They then have to add THEIR costs in to the price, plus their profit. They then sell the machine to the stores, who also have costs. They would also like to make a profit. Often they take $20 or so off list, give free memory, or a printer, free shipping, etc. That has to be accounted for as well.
Apple makes up for some of that on its own properties, including the web site. Apple sells about half of their stuff themselves, so you can calculate the average.
This plays into my hands, not yours. Apple have to shave even less off in terms of component costs to bring the retail price down to $499 and maintain the same percentage profit margin.
I forgot about what Apple sells to the distributor for. Lets call that amount Y. Is it not true to state that the gross margins are ((Y - actual component costs)/Y) x 100 ?
This plays into my hands, not yours. Apple have to shave even less off in terms of component costs to bring the retail price down to $499 and maintain the same percentage profit margin.
I forgot about what Apple sells to the distributor for. Lets call that amount Y. Is it not true to state that the gross margins are ((Y - actual component costs)/Y) x 100 ?
Hmmm, just wondering. In the long run, would it help or hurt Apple to sell the Minis at a small profit, break even, or even at a loss to make it cheaper and try to gain some marketshare (not even sure if making the price a steal of a deal low would do this, but just pondering....). Kinda like how the Xbox and Playstation do to battle for marketshare.
I dunno.....I didn't pay attention in economics so I'm just thinking on ignorant knowledge...
Anyways, as for the price of a lowend Mac, what would you be willing to pay for a computer if you were going to use it only for email, web, iTunes, and maybe iPhoto and nothing else? No Garageband, iDVD/iMovie, Office, Photoshop, etc., just the aforementioned items.
This is incorrect. You are assuming that the component cost for the $599 mini is $599. It seems paradoxical, but you don't have to save $100 in component costs to reduce the retail price by $100 and maintain the margin.
e.g. assuming a 25% gross margin, the mini's component costs are $449.25
To have a $499 machine with a 25% gross margin, the component costs would be $374.35
The difference in component costs is $75.
Yep, forgot about that.
The iMac is around 25% gross margin before keyboard, mouse, marketing and distribution. I dunno that the mac mini is currently that high. Maybe. Perhaps iSuppli will disassemble one and let us have a guesstimate.
Still, I think the burden of proof is on you to show that the cost reductions equals $75, $80 or $100 before you can ask other folks to refute your arguement on a line by line basis as you've asked several times. Refute what?
You then have to show that the support for a single slot (and potential for larger HDs) doesn't eliminate that savings. For example the Shuttle comes with a 220 Watt power brick.
CAN you build a Shuttle like Mini for $499 with 25% margins based on the Core Solo?
I dunno but depending on Shuttle's margins the retail costs of the bare bones Shuttle built for the Pentium-M, with pretty much the features you sugggest (1 extra slot), isn't promising not given it doesn't have a CPU, HD or memory and has the older chipset.
Can you get a 1.5Ghz Core Solo + HD + 512MB RAM for less than $100 (given the margin computation is working against you in this direction)?
Hmmm, just wondering. In the long run, would it help or hurt Apple to sell the Minis at a small profit, break even, or even at a loss to make it cheaper and try to gain some marketshare (not even sure if making the price a steal of a deal low would do this, but just pondering....). Kinda like how the Xbox and Playstation do to battle for marketshare.
I'm of the opinion that this would be a really bad idea. I don't think Apple should sacrifice their margins. Apple's computers could not be "loss leaders" like games consoles. The idea with games consoles, is sell the hardware at a loss, but make the profit with licensing fees on games. Where would the profit stream be for Apple's supposedly "loss leading" computer? I don't think market share would grow fast enough. Another problem would then be that you'd got your user base used to unrealistically low hardware prices, and there's no guarantee that they would stick around once you put the hardware prices back up.
Quote:
Originally posted by Faasnat
Anyways, as for the price of a lowend Mac, what would you be willing to pay for a computer if you were going to use it only for email, web, iTunes, and maybe iPhoto and nothing else? No Garageband, iDVD/iMovie, Office, Photoshop, etc., just the aforementioned items.
Exactly. This is the precise question people should be asking themselves, and it is the question to which my suggested $399/$499 is the answer. In the face of PC towers out there that can do the job (edit: in terms of power, not software) for $299, it's difficult for a lot of people to stomach paying $599 for a Mac.
Still, I think the burden of proof is on you to show that the cost reductions equals $75, $80 or $100 before you can ask other folks to refute your arguement on a line by line basis as you've asked several times. Refute what?
Indeed. Now that you have developed the argument, the burden of proof is on me. All along I've been talking about maintaining margins, and I meant percentage margins, rather than absolute margins.
So, if Apple sell the $599 mini to distributors for $550 (91.8 % of retail), they'd sell a $499 one to distributors for $458.18
If the $599 machine has 25% gross margins, its component costs are $412.50, and the component costs for a 25% margin $499 machine are $343.64. So I have to save $68.86.
I'm going to estimate that the cheaper stuff saves me $95 ($20 RAM, $15 wireless, $8 Apple Remote, $30 HDD, $22 optical drive) leaving $26.14 to pay for a fan, more powerful PSU and larger case.
Now, of course, the problem with all this is that it is totally hand-wavy. I have to concede this, there is no argument against it. I can only go with my feelings about how much things cost, because there's no way I can know how much Apple buys its components for. I've based my feelings on known retail prices for components such as HDDs*, RAM**, optical drives** etc., and what I know about how much transistors etc. cost in bulk (to estimate increased costs of the PSU, I concede that the number is more than $2, I wasn't thinking straight).
In conclusion, I hope that I have shown that I am at least trying to base my opinions on known facts, unlike some other people who are moaning in this thread. But ultimately, it is down to opinions, so we just have to agree to disagree about the costings.
Apple sold almost $2 billion in software last year, and will sell more this year.
Your numbers are far off course. Last quarters total sales were $5,7+ billion.
Rework your figures.
My figures were taken directly from Apple's most recently quarterly report filed with the SEC. I may be tedious, but I do not pull numbers out of my ass. Apple's own breakdown for the three months ending 12/31/05, from page 26:
Code:
Net sales by product:
Desktops $912
Portables 812
(Total Macintosh Sales 1724)
iPod 2906
Other music-related 491
Peripherals and other hardware 303
Software, services and other sales* 325
* "Includes sales of Apple-branded operating system software,
application software, third-party software,
AppleCare, and Internet services"
Apple does not make money from boxed software. Period. You must be confusing "software" with "iPod".
Apple does not make money from boxed software. Period. You must be confusing "software" with "iPod".
That's a strange conclusion to draw. The numbers you quoted state over $300 million revenue in 3 months for software. How much are you suggesting that Apple spends per quarter on software development?
Insofar as a mini tower goes, well, you should have read the several posts I've made about that. That was my suggestion soon after Apple came out with the first G5 towers. I presented the plans (yup, I actually drew out plans) to my friends in Apple engineering management. They thought the plans made sense, and could be produced, but that "upper" management didn't want to go in that direction. Too bad. They were really very nice. They maintained the aluminum chassis, but were smaller, and didn't have the expensive metalwork for the handles or feet. There were other major changes inside, in the electronics as well to get the price to $999.
It feels so unfortunate at times that we are left in the dark as to why Apple does what it does and when it does it.
The truth is business is war. Jobs has said "their are a lot of smart companies out there who are trying to kill us". Which is true of any company, your competitor is fighting to gain as much of the market as possible. And Apple's competitors have openly declared the death of Apple.
Its clear Apple has a vision and a strategy. We just don't always know what that vision or strategy is.
Early last year for a brief time Apple did offer the single 1.8 Ghz Power Mac for $1499. Which has been the cheapest upgradable desk top Apple has sold recently. While at the same time the iMac G5 was selling for $1299 -$1799.
I would imagine the PM 1.8 G5 did not sell as well as the iMac G5.
With that option gone I do think Apple will have to release a machine something like this becasue there is a market that needs a monitorless, upgradable machine. The Power Mac is over kill for most people in price and performance. The iMac is not upgradable which stifles flexibility.
Quote:
What would the PCIe slot in this small tower be for?
To use which ever way third party developers and consumers choose.
Quote:
My mini tower design allows for three full size slots. Is the "small" tower full depth and width to enable a full size slot? Or is it like the Cube which offered an extra slot, but half length, and slightly shorter height?
To agree with many people's complaints Apple has never been overly generous with ports and slots. They basically give us the minimum we need.
Since our theoretical machine starts at $999 they need to give us 2 Full slots.
I don't believe $100 will make or break a computer sell.
What likely happened with the $499 Mac mini is that people still spent the $100 to upgrade to the features that $599 Mac mini would have.
Instead of crippling the Mac mini just to drop it to $499 price point they just leave in all of the features that people will want in a modern computer.
If a consumer knowlingly or unknowlingly bought the $499 Mac mini they would forever have a computer with fewer modern features that will be useful in the future.
Comments
Originally posted by Faasnat
At least you got a welcome....
Hehehehe...
Welcome, Faasnat
Originally posted by melgross
The term for it is; Full Upgrade.
Most software companies used to go this route, until piracy made most of them do incremental upgrades.
Some companies still do it. But, you have to pay full price for the program, and then send in the rebate coupon, which only works if you already own the product.
The first two that come to mind are Roxio (Toast), and Symantec (Anti-Virus).
Full upgrade eh? Okay, I'll buy that. Actually, I should, don't have iLife '06 yet.
Originally posted by Mr. H
Welcome, Faasnat
Originally posted by melgross
MS, being primarily a software developer, has tremendous profits vs total sales. Extremely high margins, up to 80%.
This is the key difference, but you left out a word: "MS, being a monopoly software maker...". No other software firm has margins anywhere close to 80%, and most of the big firms make their money from support contracts, not retail sales. In terms of recouping development costs per unit, it wouldn't surprise me if Apple actually took an effective loss on each retail box of OS X and iLife, but made up for it with much higher absolute margins on their much higher volume of hardware sales.
There's really no other way for them to do it. According to their recent financials, sales of Mac hardware were $1.7B for the quarter, while "other" sales (which includes all Apple and non-Apple software as well as AppleCare and .Mac) totaled only 0.3B. Figure sales of boxed OS X are, generously, one-tenth of that figure. $30M in retail sales will not cover $100M+ in development costs. The hardware sales have to cover a fair portion of development, so including OS X (or iLife) with a Mac is not "free" for Apple. (Of course, these days iPods are subsidizing everything. ;P)
Originally posted by Faasnat
At least you got a welcome....
Yes, but no hug. <snif!> Call yourselves a friendly user community...
Originally posted by Towel
This is the key difference, but you left out a word: "MS, being a monopoly software maker...". No other software firm has margins anywhere close to 80%, and most of the big firms make their money from support contracts, not retail sales. In terms of recouping development costs per unit, it wouldn't surprise me if Apple actually took an effective loss on each retail box of OS X and iLife, but made up for it with much higher absolute margins on their much higher volume of hardware sales.
There's really no other way for them to do it. According to their recent financials, sales of Mac hardware were $1.7B for the quarter, while "other" sales (which includes all Apple and non-Apple software as well as AppleCare and .Mac) totaled only 0.3B. Figure sales of boxed OS X are, generously, one-tenth of that figure. $30M in retail sales will not cover $100M+ in development costs. The hardware sales have to cover a fair portion of development, so including OS X (or iLife) with a Mac is not "free" for Apple. (Of course, these days iPods are subsidizing everything. ;P)
Well, all big software houses have very large margins. I just depends on where the use them. MS's is somewhat larger than most others, nut not drastically so.
Apple makes a great deal of profit on its software, including OS X. This has been acknowledged by them more than once.
Apple sold almost $2 billion in software last year, and will sell more this year.
Your numbers are far off course. Last quarters total sales were $5,7+ billion.
Rework your figures.
Originally posted by Mr. H
Fact:
Apple sells a $599 Intel Mini, for a profit, with the following specs:
Attractive casework
Core Solo processor
512 MB of laptop RAM
60 GB 5400 RPM laptop HD
DVD-ROM, CD-RW combo laptop optical drive
Integrated graphics
Wireless networking + Bluetooth
Apple Remote
Fact: Desktop RAM costs less than laptop RAM
From the iSupply iMac Core Duo this is currently $20/256MB. Total $40. Say you save half...$20.
Fact: No wireless networking or bluetooth costs less than wireless networking and bluetooth.
I understand that the chipset is $5 apiece? Say you save $10.
Fact: a 40 GB 3.5" hard drive costs a lot less than a 60 gig 5400 rpm laptop drive
Fact: A full-size CD-RW optical drive costs less than a combo laptop optical drive
Fact: No Apple remote costs less than an Apple remote
Fact: A bigger form-factor makes custom assembly quicker and therefore cheaper.
Even assuming the two items that add costs is $0 you have to show that these items represent $70 worth of savings to reach $499.
a graphics card in the single available PCI-E slot (edit: just to make it clear, integrated graphics would be standard, a PCI-E graphics card would be an upgrade).
A MB larger case and power supply to support a PCI-E slot is not a $0 cost item.
I dunno that your assertion requires refuting as much as supporting with numbers. Yes, the deleted/downgraded items does represent a cost savings. How much?
Even assuming $0 increase for a slot and additional power your numbers are iffy to support a $100 price drop given that Shuttle SD11G5 bare-bone kits run $400 retail.
Vinea
Originally posted by vinea
I understand that the chipset is $5 apiece? Say you save $10.
I'm thinking more like $15.
I appreciate that my working here is rather "hand-wavy". My thinking is: just look at the mini! Apple have managed to pull off, for $599, what other manufacturers are charging $999 for. It beggars belief that they would be unable to produce a cheap mini tower.
Originally posted by vinea
Even assuming the two items that add costs is $0 you have to show that these items represent $70 worth of savings to reach $499.
This is incorrect. You are assuming that the component cost for the $599 mini is $599. It seems paradoxical, but you don't have to save $100 in component costs to reduce the retail price by $100 and maintain the margin.
e.g. assuming a 25% gross margin, the mini's component costs are $449.25
To have a $499 machine with a 25% gross margin, the component costs would be $374.35
The difference in component costs is $75.
However, there are a lot of people who don't consider ease of use, integrated software, lower learning curve as part of the costs making the Mac a better value rather than a cheaper system (lack of viruses is only until virus writers start writing 'em for the Mac). They just look at the bottom line -- what's going to be coming out of their wallets and make their decision off that.
Another parts it that people who buy systems already know how to work the programs they're going to use on any platform so that part also isn't a factor in the total cost.
Yes, in the long run, there'll be less headache running OS X than something else and less time will be spent hacking away at the OS. But most people don't think of this when buying a computer.
Well, paragraphs 1 and 3: if that is true, Mac user really ARE a different breed. I am glad I am not one of those "most people"
Paregraph 2: I don't agree... what about new users?
Originally posted by Mr. H
e.g. assuming a 25% gross margin, the mini's component costs are $449.25
Apple's component costs for this machine can't be more than about $300.
That might easily be too high. Then Apple has its costs + profit. It then sells the machines to the distributor.
Don't forget that Apple must sell these machines to the distributors for no more than about $450. They then have to add THEIR costs in to the price, plus their profit. They then sell the machine to the stores, who also have costs. They would also like to make a profit. Often they take $20 or so off list, give free memory, or a printer, free shipping, etc. That has to be accounted for as well.
Apple makes up for some of that on its own properties, including the web site. Apple sells about half of their stuff themselves, so you can calculate the average.
Originally posted by Bergermeister
Yes, buying the box will install on a system that does not have iLife installed, but (we discussed this on another thread), as iLife NOW comes bundled with every Mac, it is basically an upgrade users are paying for. Not for everyone, but newbies at least.
Yeah, well, I guess that holds true now......but was just sayin'.....I think it was melgross that classified it as a full upgrade package. That works for me....
Well, paragraphs 1 and 3: if that is true, Mac user really ARE a different breed. I am glad I am not one of those "most people"
What about potential switchers? They are not currently Mac users. I used the broad term "most people" because a lot of the threads I read (not just Mac-centric forums) I see people saying wow, nice computers, I would want one, but they're too expensive, I'll wait till the price comes down....
Paregraph 2: I don't agree... what about new users?
Well, that part don't apply to new users.
Originally posted by melgross
Apple's component costs for this machine can't be more than about $300.
That might easily be too high. Then Apple has its costs + profit. It then sells the machines to the distributor.
Don't forget that Apple must sell these machines to the distributors for no more than about $450. They then have to add THEIR costs in to the price, plus their profit. They then sell the machine to the stores, who also have costs. They would also like to make a profit. Often they take $20 or so off list, give free memory, or a printer, free shipping, etc. That has to be accounted for as well.
Apple makes up for some of that on its own properties, including the web site. Apple sells about half of their stuff themselves, so you can calculate the average.
This plays into my hands, not yours. Apple have to shave even less off in terms of component costs to bring the retail price down to $499 and maintain the same percentage profit margin.
I forgot about what Apple sells to the distributor for. Lets call that amount Y. Is it not true to state that the gross margins are ((Y - actual component costs)/Y) x 100 ?
Originally posted by Mr. H
This plays into my hands, not yours. Apple have to shave even less off in terms of component costs to bring the retail price down to $499 and maintain the same percentage profit margin.
I forgot about what Apple sells to the distributor for. Lets call that amount Y. Is it not true to state that the gross margins are ((Y - actual component costs)/Y) x 100 ?
Hmmm, just wondering. In the long run, would it help or hurt Apple to sell the Minis at a small profit, break even, or even at a loss to make it cheaper and try to gain some marketshare (not even sure if making the price a steal of a deal low would do this, but just pondering....). Kinda like how the Xbox and Playstation do to battle for marketshare.
I dunno.....I didn't pay attention in economics so I'm just thinking on ignorant knowledge...
Anyways, as for the price of a lowend Mac, what would you be willing to pay for a computer if you were going to use it only for email, web, iTunes, and maybe iPhoto and nothing else? No Garageband, iDVD/iMovie, Office, Photoshop, etc., just the aforementioned items.
Originally posted by Mr. H
This is incorrect. You are assuming that the component cost for the $599 mini is $599. It seems paradoxical, but you don't have to save $100 in component costs to reduce the retail price by $100 and maintain the margin.
e.g. assuming a 25% gross margin, the mini's component costs are $449.25
To have a $499 machine with a 25% gross margin, the component costs would be $374.35
The difference in component costs is $75.
Yep, forgot about that.
The iMac is around 25% gross margin before keyboard, mouse, marketing and distribution. I dunno that the mac mini is currently that high. Maybe. Perhaps iSuppli will disassemble one and let us have a guesstimate.
Still, I think the burden of proof is on you to show that the cost reductions equals $75, $80 or $100 before you can ask other folks to refute your arguement on a line by line basis as you've asked several times. Refute what?
You then have to show that the support for a single slot (and potential for larger HDs) doesn't eliminate that savings. For example the Shuttle comes with a 220 Watt power brick.
CAN you build a Shuttle like Mini for $499 with 25% margins based on the Core Solo?
I dunno but depending on Shuttle's margins the retail costs of the bare bones Shuttle built for the Pentium-M, with pretty much the features you sugggest (1 extra slot), isn't promising not given it doesn't have a CPU, HD or memory and has the older chipset.
Can you get a 1.5Ghz Core Solo + HD + 512MB RAM for less than $100 (given the margin computation is working against you in this direction)?
Vinea
Originally posted by Faasnat
Hmmm, just wondering. In the long run, would it help or hurt Apple to sell the Minis at a small profit, break even, or even at a loss to make it cheaper and try to gain some marketshare (not even sure if making the price a steal of a deal low would do this, but just pondering....). Kinda like how the Xbox and Playstation do to battle for marketshare.
I'm of the opinion that this would be a really bad idea. I don't think Apple should sacrifice their margins. Apple's computers could not be "loss leaders" like games consoles. The idea with games consoles, is sell the hardware at a loss, but make the profit with licensing fees on games. Where would the profit stream be for Apple's supposedly "loss leading" computer? I don't think market share would grow fast enough. Another problem would then be that you'd got your user base used to unrealistically low hardware prices, and there's no guarantee that they would stick around once you put the hardware prices back up.
Originally posted by Faasnat
Anyways, as for the price of a lowend Mac, what would you be willing to pay for a computer if you were going to use it only for email, web, iTunes, and maybe iPhoto and nothing else? No Garageband, iDVD/iMovie, Office, Photoshop, etc., just the aforementioned items.
Exactly. This is the precise question people should be asking themselves, and it is the question to which my suggested $399/$499 is the answer. In the face of PC towers out there that can do the job (edit: in terms of power, not software) for $299, it's difficult for a lot of people to stomach paying $599 for a Mac.
Originally posted by vinea
Still, I think the burden of proof is on you to show that the cost reductions equals $75, $80 or $100 before you can ask other folks to refute your arguement on a line by line basis as you've asked several times. Refute what?
Indeed. Now that you have developed the argument, the burden of proof is on me. All along I've been talking about maintaining margins, and I meant percentage margins, rather than absolute margins.
So, if Apple sell the $599 mini to distributors for $550 (91.8 % of retail), they'd sell a $499 one to distributors for $458.18
If the $599 machine has 25% gross margins, its component costs are $412.50, and the component costs for a 25% margin $499 machine are $343.64. So I have to save $68.86.
I'm going to estimate that the cheaper stuff saves me $95 ($20 RAM, $15 wireless, $8 Apple Remote, $30 HDD, $22 optical drive) leaving $26.14 to pay for a fan, more powerful PSU and larger case.
Now, of course, the problem with all this is that it is totally hand-wavy. I have to concede this, there is no argument against it. I can only go with my feelings about how much things cost, because there's no way I can know how much Apple buys its components for. I've based my feelings on known retail prices for components such as HDDs*, RAM**, optical drives** etc., and what I know about how much transistors etc. cost in bulk (to estimate increased costs of the PSU, I concede that the number is more than $2, I wasn't thinking straight).
In conclusion, I hope that I have shown that I am at least trying to base my opinions on known facts, unlike some other people who are moaning in this thread. But ultimately, it is down to opinions, so we just have to agree to disagree about the costings.
* Cheapest 60 gig 5400 rpm laptop drive from newegg: $82; cheapest 40 gig 3.5" drive from newegg: $42. Price difference: $40
** couldn't find 667 DDR-II SODIMMS at newegg, so compared 533 prices. Cheapest branded SO-DIMM 512 MB (2 x 256): $66; cheapest branded DIMM 512MB (2 x 256): $46. Price difference: $20
*** cheapest slim CD-RW, DVD-ROM combo drive at newegg: $53; cheapest full-size CD-RW drive at newegg: $20. Price difference: $33
Originally posted by melgross
Apple sold almost $2 billion in software last year, and will sell more this year.
Your numbers are far off course. Last quarters total sales were $5,7+ billion.
Rework your figures.
My figures were taken directly from Apple's most recently quarterly report filed with the SEC. I may be tedious, but I do not pull numbers out of my ass. Apple's own breakdown for the three months ending 12/31/05, from page 26:
Net sales by product:
Desktops $912
Portables 812
(Total Macintosh Sales 1724)
iPod 2906
Other music-related 491
Peripherals and other hardware 303
Software, services and other sales* 325
* "Includes sales of Apple-branded operating system software,
application software, third-party software,
AppleCare, and Internet services"
Apple does not make money from boxed software. Period. You must be confusing "software" with "iPod".
Originally posted by Towel
Apple does not make money from boxed software. Period. You must be confusing "software" with "iPod".
That's a strange conclusion to draw. The numbers you quoted state over $300 million revenue in 3 months for software. How much are you suggesting that Apple spends per quarter on software development?
Insofar as a mini tower goes, well, you should have read the several posts I've made about that. That was my suggestion soon after Apple came out with the first G5 towers. I presented the plans (yup, I actually drew out plans) to my friends in Apple engineering management. They thought the plans made sense, and could be produced, but that "upper" management didn't want to go in that direction. Too bad. They were really very nice. They maintained the aluminum chassis, but were smaller, and didn't have the expensive metalwork for the handles or feet. There were other major changes inside, in the electronics as well to get the price to $999.
It feels so unfortunate at times that we are left in the dark as to why Apple does what it does and when it does it.
The truth is business is war. Jobs has said "their are a lot of smart companies out there who are trying to kill us". Which is true of any company, your competitor is fighting to gain as much of the market as possible. And Apple's competitors have openly declared the death of Apple.
Its clear Apple has a vision and a strategy. We just don't always know what that vision or strategy is.
Early last year for a brief time Apple did offer the single 1.8 Ghz Power Mac for $1499. Which has been the cheapest upgradable desk top Apple has sold recently. While at the same time the iMac G5 was selling for $1299 -$1799.
I would imagine the PM 1.8 G5 did not sell as well as the iMac G5.
With that option gone I do think Apple will have to release a machine something like this becasue there is a market that needs a monitorless, upgradable machine. The Power Mac is over kill for most people in price and performance. The iMac is not upgradable which stifles flexibility.
What would the PCIe slot in this small tower be for?
To use which ever way third party developers and consumers choose.
My mini tower design allows for three full size slots. Is the "small" tower full depth and width to enable a full size slot? Or is it like the Cube which offered an extra slot, but half length, and slightly shorter height?
To agree with many people's complaints Apple has never been overly generous with ports and slots. They basically give us the minimum we need.
Since our theoretical machine starts at $999 they need to give us 2 Full slots.
I don't believe $100 will make or break a computer sell.
What likely happened with the $499 Mac mini is that people still spent the $100 to upgrade to the features that $599 Mac mini would have.
Instead of crippling the Mac mini just to drop it to $499 price point they just leave in all of the features that people will want in a modern computer.
If a consumer knowlingly or unknowlingly bought the $499 Mac mini they would forever have a computer with fewer modern features that will be useful in the future.