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With annual growth already in the 30-50% range, price drops might push them to growth rates that would really strain Apple's quality-control system. So while even faster growth would be great, I wonder if they're ready for it.
What a great "problem" to have!

Aug 10, 08 - 12:02 pm Comment from: Denny

If you want to be a market leader then you've got to be able to handle the demand. I'm sure that they'll do just fine.

Totally non-scientific but the "windoze" users I talk to still perceive the Macs as being way more than PCs and thus they justify their on-going annoyance with the PC as justified and tolerable.

As has been pointed out already, Apple's quality has dropped with the increase in market share and the rapid pace of recent growth. Dropping prices to drive even faster market share growth and higher adoption rates could easily cause massive quality problems also.

There is no doubt that Apple will lower prices to go after more market share at a lower price point once the high end of the market is saturated or conquered, but is that time now? Nothing indicates that to me. Apple does not "own" the high end yet, and as long as Mac adoption-rates are as high as they are now, it's hard to argue that the high-end market is already saturated (as the article implies.)

Furthermore, an across the board price drop even if limited just to the laptop segment, would incur much more of a drop in margins than Apple recently guided for. This article basically argues that *all* Macs will drop in price soon, based on no evidence at all really.

Apple might take this strategy if it thinks it can capture a huge part of the computer market in general,but that kind of wild gamble is not really Apple's style. Once you lower your margins, there is no way back to the fat margins of earlier years. Throwing away a huge chunk of profitability on a gamble intended to increase market share in the middle of an economic depression doesn't sound like a rational choice to me. Especially when by merely doing nothing new at all, Apple can bask in huge profits and hugely increased market share anyway.

This whole article seems predicated on the assumption that Apple is really focussed on market share (they are not), and that all these years they have just been waiting for that "power move" where they take over the lead from "front-runner" Microsoft. It's a racing analogy that appeals to tech journalists of a certain type, but not necessarily anything that has been discussed around the table in the Apple boardroom.

Aug 10, 08 - 12:26 pm Comment from: Bitjockey

Apple doesn't lower it's prices to entice buyers. It raises its feature set, quality, and user experience. That's what sets Apple apart from the crowd. Apple patiently bets on the increasing intelligence of the populace for it's growth and is thus able to make money when unit sales are down. It's a game of mindshare not marketshare which is why Wall street will never understand.

Oh, yeah, and those mfg's should be quaking in their boots!

Aug 10, 08 - 12:33 pm Comment from: Zune Tang®

The only so-called computer manufacturer who should be “quaking in their boots” is Apple.

There are only so many smug, pretentious people willing to pay exorbitant prices for proprietary computers that don’t play games and have no purpose in the enterprise. How many parents would willingly shell out so much money for such a useless machine? Not that many. All the enlightened kids I know are getting Gateway or Dell laptops running Vista. Buh-bye Apple.

Your potential. Our passion.™

I do service and IT work for the Apple/Mac platform and I can't see that the quality of the hardware or software has fallen a bit over the years.
I see a quite a bit of Lenovos and they are really Dollar Store junk.

I am with Jeremy - with one qualification - on this one. Apple cannot afford to ship junk, nor can it afford to allow its gross margins to sink much below 30% (the punishment from stockholders would be withering). I don't foresee any broad reduction in Mac pricing.

That said - the exception - Apple has in the past done some pretty aggressive things in the education market. There have been education-market-only computers (eMac) and a lot of good deals. Education is a controllable channel, where Apple can set pricing pretty much independent of the other sales venues.

I could see Apple doing something interesting, especially in the laptop space, for education.

As educated consumers, we know that it's the total cost of ownership that matters. What does it cost for security software and the time to constantly battle the viruses and worms that plague Windows ?

As Mac users tell you " It just works ! ". And it does.

@Jeremy
"As has been pointed out already, Apple's quality has dropped with the increase..."

You must be a blogger paid by Micro$oft. Nothing you say makes any sense. You must be a Jeremy posner. Go troll somewhere else.

MW-look as in look what I've found!

Sorry about my post. Someone spiked my Tang™ with an anti-truth serum.

"All the enlightened kids I know are getting Gateway or Dell laptops running Vista."

That's going to be one scary ass sleep over.

AAPL is creeping back to $165-170 range as of Friday 8/8. What a opportune time to invest and even most analysts forecasting that Apple shares will reach $230-250 range soon. However, the concerns about over extending are real but it is only in the short term.

Make a 10-20% price cut and you'll sell twice as much = rising benefits and a monster plague for PC assemblers!

Apple's elasticity of price on their computers does not justify a dramatic price drop to grab market share. What they would give up in margin in exchange for market share is economically unjustified. The attendant change in production, etc., to feed into the newfound demand would be at odds with the existing corporate structure, manufacturing model, distribution model, etc. A fool's errand.

Apple will adjust their prices only minimally, and continue to target only higher end segments that deliver superior margins and let Dell et al chase after the lower rung shit. They do not want to pay for quality and Apple does not want them as customers. Both sides win.

Apples margins are destine to fall because of the margin contraction coming from the introduction of the iPhone Nano slated for next year. This will reduce margins substantially from the 50% or so (gross margins, that is) they currently get from the iPhone they sell.

Learn.

A higher percentage of Apples revenue will come from iPhones. A lower gross margin will result from introduction of the iPhone Nano, bringing down gross margin levels from 33% to probably 31%. That is why they will drop, NOT because Apple will go after the shit bottom 25% or so of the market that only drags down their margins, ruins their corporate culture, and screws up their processes and profits.

Remember what I have said here.

I have 2 MacBooks, 2 IMacs and had a problem with the 24" which necessitated adding some code to the Terminal whilst talking to a second level tech person in Austin...this was not a machine problem but a software problem. The battery on the first MacBook gets down to about 15% and it may quit, problem solved by plugging it in. As I am wearing T-shirts with System 7 or OS 8 on them you can guess how many Macs I've had, As a user for twenty years, my experience is there is no quality problem worth mentioning and if there is Apple will fix it.
As for increasing volume causing quality problems, all the brands are using mainly Chinese, Taiwanese, assemblers, and the components sometimes give problems. For everybody, including Apple. I'm sure Apple oould take over Dell's or HP's market share and the same manufacturers would be involved, with quality no worse and probably better than before.

Jeremy, x, posner: you keep making the same writing mistakes.

If you want to be a market leader then you've got to be able to handle the demand. I'm sure that they'll do just fine.

Have we already forgotten about MobileME and the iPhone 3G rollout?

From a cloner's perspective, I'd be much more concerned about the worsening crapware from Redmond than any price cuts from Apple. What good are prices when you're at the mercy of a sales-killing OS?

Aug 10, 08 - 02:01 pm Comment from: Mr. Reeee

Slow and steady growth has been Apple's mantra for the past 10 years. Why break that now?

Macs are priced pretty well right now. Sure, we'd all like to spend a bit less, but I'd hate to see Apple duke it out with the Bottom-Feeder Pee Sea BoxStuffers™ trying to reel in the WalMart crowd. The last thing we need is for Apple's historically high quality to start slipping, if it already hasn't started to.

As a start Apple needs to beef up the Mac mini by adding a real graphics card. Or just make a hybrid Mac mini/TV.

And to start playing that old saw...
I'd love to see a mid-range MacPro-level tower. Half-a-MacPro. Half the slots, half the size at around half the price. The MacPro is just too damn big for me OR to live comfortably under my desk, barring multiple amputations, of course. I'd love that kind of power in a reasonable size.

I'd especially like to be able to choose a FAST and BEEFY graphics card for my VectorWorks, 3D and Photoshop work. Neither the iMac, nor my MacBook Pro really cut it in that area.

This would draw MANY new Mac users (even some PC gamers) who rightly see the headless Mac desktop lineup as extremely limited with that one HUGE, GAPING hole between the Mac mini and the MacPro!

I KNOW I'm not alone in this. What's it gonna take, Apple?

Aug 10, 08 - 02:03 pm Comment from: elgruga

I think that Apple now has some serious buying power and can get very low component prices.

Every year Apple makes over 90 million devices, so they have some power.

They wont drop prices much, but with prices dropping slightly and inflation always happening, the result is that Apple computers, indeed all computers are cheaper every year.

Of course, the machines will have more power, more facility than before.

And they are Apple computers - WAY better quality, better build etc. etc.

I dont thnk we will see any big changes until Apple reach 10 - 12% market share.

Then they have some challenges, maybe.... but they dont usually make stupid mistakes, do they?

Aug 10, 08 - 02:05 pm Comment from: macaholic

might be largest seller of hardware by percentage (Apple, that is) but is does not matter. It's the OS, stupid! And sadly, Apple is not yet in the majority there. However, at the University my daughter attends, the tech dept and the school itself are heavily MS centric, but when u see what goes into the student's rooms on move-in day, it has become more and more evident that Apple is making inroads. I have seen the shift from hardly any Mac boxes on move in day to a noticeably increased presence over the course of the last 3 years. ( Still 2 more to go, ka-ching)

Aug 10, 08 - 02:19 pm Comment from: DogGone

If Apple dropped their prices by $100 for the MacBooks then they could spur an increase in market share without completely compromising their profit margin. As their order volume to the manufacturers their component cost will go down too.

Apple do need to be careful of not dropping their prices so much that they fall into the trap of using cheap and unreliable components. Going purely for market share will end them up in the same mess that Compaq and Dell landed in.

Product reliability is very important to Apple. I have a friend who works in their QC dept and I can tell you there is incredible attention paid to product failure trends.

For those who like me used Macs in the Mac OS 7-9 days should still remember the near daily restarts or crashes. Software instability was a big problem then. There were still hardware issues too. Macs are so more stable now than then.

"What does it cost for security software and the time to constantly battle the viruses and worms that plague Windows ?"

$29 a year and 10 minutes of your time, once. That's why only Apple fanboys care about the viruses that supposedly "plague" windows.

"As a user for twenty years, my experience is there is no quality problem worth mentioning "

That's typical for a fanboy. You seem to have at least one severe ongoing issue, but it's "not worth mentioning". Unfortunately the mass market has higher expectations.

"That's why only Apple fanboys care about the viruses that supposedly "plague" windows."

That's typical for a Microsoft astroturfer.

And the astroturfers are out in force.

That must be where the money to promote Vista is going. So far, it looks like money well spent. These guys are scary brilliant.

Aug 10, 08 - 02:45 pm Comment from: qka

$29 a year and 10 minutes of your time, once. That's why only Apple fanboys care about the viruses that supposedly "plague" windows.

And a continuous drain on your computer's power to run all that anti- crap in the background.

Not to mention the daily bout of your computer being tied up downloading the latest anti - definitions and then uselessly grinding away searching to see if some heretofore unknown infection is present.

That's the "plague" of Windoze.

Aug 10, 08 - 03:13 pm Comment from: Sir Gill Bates

macaholic,

"Still 2 more to go, ka-ching"

Two more years or two more kids?

Kids are way too expensive. We bought a puppy and birth control pills. Very cost effective.

Jeremy writes, "As has been pointed out already, Apple's quality has dropped with the increase in market share and the rapid pace of recent growth."

It should be noted that Apple doesn't make this stuff any longer. But even though Foxconn and others are doing the manufacturing, Apple's name is on the box. So Apple is right to keep tabs on the product coming out of its OEM suppliers.

That said, I can only go by my sample of one. The quality of my new 20" iMac belies the "Made in China" reputation. It was as flawlessly made as anything I've purchased. The closest thing to a problem is in the wheel on the Magic Mouse (it now scrolls up, not down). I'll get that replaced the next time I'm in the Apple Store.

I go by what I have purchased from Apple. I had one hard drive failure (it's always backed up) since 1988. That's on a IIci, Performa, 150, 450 and a MBP. I bought an iBook for my daughter and I'll take that in tomorrow for a look at the superdrive. No quality problems here! Great products. Oh, I've bought 5 or 6 iPods for my family too. All great. Love my ipod touch.

@ Zung Tang
"There are only so many smug, pretentious people willing to pay exorbitant prices for proprietary computers that don’t play games"

Now I'm quite convinced that gaming is the only useful thing you care do on PC Zungie?... Only a immature 13 year old will care for that.

-"and have no purpose in the enterprise."

What a lame stupid commentary... I bought my first Mac 3 years ago, after years using that retarded POS OS you "adore" so much, and using my Macs in my work environment that unfortunately is run on Windoze, gives me a nothing but JOY. Ha! the other day all of the PCs went wacko 'cause a virus hit the servers... how sweet it was

Your potential. Our FEAR.

Aug 10, 08 - 04:01 pm Comment from: blucaso

The "generic box" manufacturers should have realized long ago that they were playing a zero-sum game with only one profit direction - lower. They are truly an economist's dream - always grinding out more volume at lower margins, seeking equilibrium, which eventually ends up at the minimum price they can accept and stay in business. In the process of finding that price, some will go out of business because they overstepped their margins and couldn't get back.

Meanwhile, Apple has played a truly remarkable game of staying one step ahead of common economic forces. They continue to add or refresh their product line and features faster than the market can react or compete. By the time competitors can match an Apple offering in appearance or feature set, Apple has moved out of the competition and up another level, where the margins are still thick and the competition thin.

I'm amazed at how they've been able to do this consistently for the last decade. And I don't think build quality has changed. Surely the latest round of problems (whether hardware or software) is no worse than the melting powerbooks or morass of system extension conflicts of yesteryear. Those who complain of deteriorating quality manufacturing from Apple today probably don't remember the Performas too clearly, or suffer from the "recency effect", in this case remembering the most recent problem much more clearly than the problems of the more distant past.

I can easily estimate that I spend MUCH less time per month on maintenance issues (hardware and software) with my Macs than I did say 6, 8 or 10 years ago. Even issues that plague Macs today (such as the common scrolling wheel problem in Mighty Mouse, as mentioned above) are more design flaws than manufacturing quality problems.

I agree with Jeremy for the most part that Apple will continueto seek a steadily increasing rate of adoption, not seek to make gigantic strenuous pushes for instant gratification.

there's some really bizarre, illogical, almost unintelligible criticism here

(yeah I'm looking at you "MikeR"!)

To clarify my statements about Apple's build quality above, I am basing that on being in the industry since the 80's using, repairing, and recommending computer systems to people. Apple's build quality is generally excellent, but many (including myself) have noted in the last couple of years that the build quality has slipped from "damn near perfect" to "very good." So it's slipping, but still far better than the average POS Dell computer etc.

The same could be said of Apple's software, except there it has slipped from it's usual "adequate" to only "passable."

Let's go for a little more share, Apple

Jeremy
The software is not slipping. It's as solid as ever. You take a sentence someone wrote and made it into a fact, where no evidence exists. Lighten up.

Perhaps what "quaking on their boots" means is a rumor beginning about the confluence of Bootcamp and Quake. Something really earth shattering. We'll read about it Monday when the anal-ists get back from their weekend Gesalt therapy.

The only feature Apple laptops are missing currently is a BluRay disk.

Apple's laptops use standard Intel chipsets just like any other vendor. The Aluminum sheetmetal is nice touch, and the ergonomics and quality far outshine all other vendors though.

IMHO Apple could take all other PC vendors to the mat with a margin cut. They assemble and drop ship from China, and undoubtedly have assembly costs as low or lower than any other vendor. There is NO WAY they could be beat on cost with a similar hardware configuration.

The difficulty is changing the mindset of those PC-types who buy their computers at WalMart and only look at the price. Maybe Apple really doesn't want their money or need them as customers.

MSNBC make you install Silverlight to watch videos from the Olympics

Have you ever used a computer that wasn't wasting half its processor cycles to keep it safe? That was my first reaction to Vista (installed on a brand new Acer laptop at work, one that was advertised as 'Vista Ready') when something as simple as sending an email suddenly took more than a minute, the entire system would choke and wheezes if more than one of any of the Office apps are running simultaneously, and when opening any kind of media in Windows Media Player resulted in a crash (though admittedly, just the programs seem to crash most of the time, not the entire system. Improvement? I guess, if we're speaking in terms of relativity).

And please don't tell me I don't know what I'm doing. I've been using both the Mac OS and Windows daily for at least 16 years now. The fact that a Windows PC isn't safe being connected to public networks such as, say, THE INTERNET, without anti virus, anti adware, anti etc., for more than 2 seconds without becoming infected is just sad. It may have looked like Windows was going to go somewhere once upon a time, but without a complete let's-start-from-scratch rewrite, it is utterly useless as a modern operating system. Unix is where it's at, baby.

Aug 10, 08 - 06:57 pm Comment from: Macromancer

"Totally non-scientific but the "windoze" users I talk to still perceive the Macs as being way more than PCs and thus they justify their on-going annoyance with the PC as justified and tolerable."

Then they deserve the cesspool the live in.

Aug 10, 08 - 07:55 pm Comment from: MacIrish

"Unfortunately the mass market has higher expectations."

They may have higher expectations, but they're settling for Windows.

Aug 10, 08 - 08:00 pm Comment from: amyhre

@OLYMPICS

MSNBC make you install Silverlight to watch videos from the Olympics.

What's more, it can't be version 1.0; it must be 2.0 or greater. This rules out those of us who still have PPC chips and there are still quite a few of us.

A very slight price drop would be effective while adding some features. Gradual.

"Have you ever used a computer that wasn't wasting half its processor cycles to keep it safe? "

Have you ever used a new computer for web browsing and email which is using anywhere near half it's processor cycles for anything including antivirus?

"And please don't tell me I don't know what I'm doing"

Why not? After 16 years have you got tired of hearing it? Because I get the feeling that you hear it a lot.

he only so-called computer manufacturer who should be “quaking in their boots” is MICROSOFT.

There are only so many smug, pretentious people willing to pay exorbitant prices for proprietary computers that don’t play games and have no purpose in the enterprise. How many parents would willingly shell out so much money for such a useless machine? Not that many. All the enlightened kids I know are getting MacBooks or MacBook Pro laptops running Leopard. Buh-bye Microsoft.

Microsoft’s Windows Vista ‘security’ rendered completely useless by new ‘unfixable’ exploit
Your potential. Our Blunder.™

Aug 10, 08 - 09:28 pm Comment from: ichi

@Denny

we have, because they fixed is to fast -- be afraid be VERY afraid.

@ Nick Fury

i must say, that while i prefer very intelligent partners, _1, that sleep over maybe the best stop for loads of one stand action.

Aug 10, 08 - 10:03 pm Comment from: Olmecmystic

Some of you who don't want to see Apple lower prices are forgetting something...we're in a recession! For a lot of people, just the fact that APPLE cut prices at all, let alone 5-10%, would be huge, especially heading into the back-to-school and holiday seasons.

The conjecture is new form-factor MB's and MBP's at lower prices(!?). The masses would lap this up because it would sync in their minds with the up-front price drop on the 3G iPhone. Apple expands their ecosystem while their competitors are feeling the pinch. As some of you have mentioned, they've BEEN selling Macs at triple the rate of everybody else for about eight quarters or so WITHOUT cutting prices.

I think Steve Jobs and Apple have made a calculation that the time is now to grab market share in the smartphone AND computer markets, even as the economy is in a downturn of unforeseeable duration. The PC-commodity-box proliferators don't even have the margin flexibility to do something like this (or counter it).

Apple can take the hit now and come out of it with 12-15% market share by the time the economy rebounds. Sounds like a plan to me.

Peace.
Olmecmystic

hmm.
I think you will see a modest price drop across the board, maybe $100. Apple needs to break the $999 barrier w/ a notebook- so $999 for the regular store and $899 for the education store. Component price drops alone could nearly generate this, a few points off the margin at most and their there.

I'm happy with the quality of the last 5 macs bought by me or family members, and actually they seem to be getting better, not worse.

Hey Zune Tang. You said "he only so-called computer manufacturer who should be “quaking in their boots” is MICROSOFT"

Microsoft is not a computer manufacturer.

And that is not a book quake, it's a death pang.

Keep posting. Love your stuff.

Aug 11, 08 - 01:07 am Comment from: MacMan

Everyone is overly optimistic about prices dropping. If you look historically, it's MUCH more likely Apple will add huge value for the SAME price, which no competitor could match.

For the past 30 years Apple has refused to play the "market share" game because it means dropping margins. Personally, as an investor in Apple, I would think that profits would soar on lower margins if sales went from 8% market share to 25-30%.(lower your margins by 10% but triple or quadruple your sales). Here's the math:

Today 8% market share means $1B profit @34% profit margin with gross revenue at $7.5B. Now, obviously $1B is not 35% of $7.5B because the $7.5B includes iPods, iPhones, software, etc. So let's assume that they sold about $3B worth of Macs. If they drop the price 10% and instead of selling 2.5M macs in a quarter they sell 10M, it would imply a revenue of just under $11B, 25% of which would be $2.5B profit. So they stand to make MUCH more money if they can cut prices slightly and increase market share.

This really is not impossible. But if the last 30 years is anything to go by, this won't happen. It's not their trademark. As I said above, it's much more likely that they dramatically increase value while keeping the same price.

Time will tell (btw, I'd be VERY happy to be wrong about this- I'm in the market for a new MBP- ESPECIALLY if they bring the magnetic latch to the MBP- I just HATE the current one...)

You're assuming a lot of elasticity of demand for a tiny 10% price drop.

Apple would need to take 30%-50% off the price for a new lower spec entry level Mac to be on an even playing field with Dell and HP. 10% just isn't going to generate those kind of volume increases.

It sounds like is Apple has finally realized that almost all machines sold at retail cost less than $1000, and that other vendors rapidly drop the price of new hardware and quickly offer more value, and Apple who are used to long product cycles and constant prices for the life of any one given product just don't choose to match them.

So what I think we're going to see from Apple is a change in policy, a change to more "PC style" pricing. A unit comes in at $1099, drops quickly to $900 then $700 then $500 and within 18-24 months is gone from the lineup. Meanwhile newer units replace it at the top end.

In addition Apple's probably realized the limits of it's predominantly company store approach when all other PCs are sold everywhere from Best Buy to Wal-Mart. Wal-Marts are everywhere, but not every population center can support an Apple store. In going out through other retailers, there's going to be a hit to margins.

Aug 11, 08 - 01:43 am Comment from: quado

@zune tang™

You're so pathetic...I love it! Your comments wreak of self-doubt. You're relentless dissing of Apple-even when you have the facts wrong--is so useless. Your comments are forever logged on the internet. Time WILL tell how Apple does...the sales statistics won't lie and your foolishness will be forever cemented.

@ Raymond in DC

The problem you mention with your Mighty Mouse is simply dirt. I have had the same problem with every Mightly Mouse i have owned - simply take a piece of scotch tape and run it over the ball a few times and it will work like new!!