“Glancing at Apple’s latest quarterly numbers, it’s hard to argue that its business strategy – premium prices for premium products equals high profit margins – isn’t working. Armed with $25 billion in cash, Steve Jobs’ view of the immediate future, echoed by a number of analysts, seems equally persuasive. ‘We may get buffeted around by the waves a little bit but we’ll be fine,” Andrew S. Ross writes for The San Francisco Chronicle.
Ross writes, “Not, however, if analyst Trip Chowdhry of Global Equities Research in Half Moon Bay is right. ‘Apple is selling Cadillacs to people who can no longer afford them,’ he said.”
MacDailyNews Take: It’s packaged in a nice, concise sound-bite, but upon any inspection at all, Mr. Chowderhead’s theory falls apart quicker than a Compaq laptop. The average Mac user is smarter and richer than the average Windows PC user. Mac users (and premium buyers in general) are among the last affected by an economic slowdown, if they’re affected at all. The real problem upfront is for the Dells and HPs of the world who have customers who are obviously extremely sensitive to initial sticker price. HP, Dell et al. compete basically only on price. So, how low will they have to go — no margins, or even negative margins — just to maintain their market share numbers?
Apple doesn’t have that problem. Mac users understand that TCO is what’s important, not initial sticker price. Mac users are also able to compare similarly-spec’ed computers and can therefore see that Apple competes very well with Windows PC box assemblers’ prices. Unlike most Windows PC sufferers, most Mac users have used both Macs and Windows PCs (at work and/or school) and have therefore made an informed choice.
Ross continues, “That would include me. I had been gearing up eagerly to buy one of Apple’s new, sub-$1,000 MacBooks the world had been told to expect. As we know, that price point didn’t transpire. The low-end model costs $1,299, and that was too rich for my blood. So I hooked up an older super-lightweight Dell Latitude to my monitor, and now I’m a Windows guy.”
MacDailyNews Take: B.S. No real Mac user we know would blithely dump their Mac to become a “Windows guy” over a measly $299. It simply doesn’t happen as Ross — who obviously can’t tell a rumor echoing around the Web from reality — describes. Mac users casually subjecting themselves to years of frustration and suffering in a bag of hurt just to save a few bucks upfront? Ross’ story just doesn’t ring true. It’s the OS and the software, stupid. Real Mac users understand that implicitly. “You can take my Mac when you pry my cold, dead fingers off the mouse!” isn’t an empty saying, it’s a truism.
Ross continues, “How many people out there are like me is the multimillion-dollar question as Christmas approaches. Will the “premium Apple experience” matter compared with $400 rivals that, in this age of cloud computing and so forth, aren’t so very different?”
Full article here.
MacDailyNews Take: Ross is so obviously not a Mac user, it’s painful to slog through his pretending. Anyone who really uses a Mac understands that $400 pieces of junk saddled with Windows Whatever are very different indeed. And, oh, by the way, Apple offers a $999 MacBook (even less for education customers).
John Markoff reported for The New York Times yesterday, “Steven P. Jobs appeared as a surprise ‘special guest’ on Apple’s earnings call Tuesday afternoon. Mr. Jobs noted in particular the loyalty of Apple customers and suggested that while they might delay purchases, it was unlikely they would leave the computer maker for competitors.”
Markoff reported, “A recurring question among Apple watchers for decades has been, ‘When is Apple going to introduce a low-cost computer?’ Mr. Jobs answered that decades-old complaint by stating, ‘We don’t know how to build a sub-$500 computer that is not a piece of junk.’ He argued instead that the company’s mission was to add more value for customers at current price points.” Full article here.
MacDailyNews Take: It certainly seems to be working for Apple, as large numbers of personal computer buyings are finally starting to “get it.” According to Gartner, Apple’s Mac sales grew 30 times that of the PC market as a whole in third quarter 2008 without Apple stooping to dangle cheapo junk a la HP, Dell, and the rest of the low- or no-margin, bait-and-switch PC box assemblers.
[Thanks to MacDailyNews Reader “Gman” for the heads up.]
Long term value trumps short term savings, crisis or no.
or
“Dell, for the guy who can’t see past next quarter’s bottom line”
My new Cadillac doesn’t have Firewire either.
Analysts should stop treating Apple to be a homogeneous product producer
QUALITY….VALUE….
Anyone who knows what these are will always buy Apple. Apple’s customers have always been quality and value conscious customers, who know that they get more for their money by buying Apple products and because of quality and that very reason they always end up better off with products and a customer experience that is far better and of much more value then ANY other competing products.
So we’re supposed to take financial advice from a guy who can’t afford an extra few hundred bucks to get the computer he wants?
As a writer (online at that!) the computers are the tools of his trade. At the very least he should be willing to invest in something he’ll be using for hours and hours every day to earn a living.
Apple’s supposed to take his advice when setting the price-point on their highest-volume product?
What amazes me most about all the reporting on the mythical $800 MacBook, is that no analyst that I’ve heard has asked Honda to mark their Civic down 35% to weather the economic conditions. If it’s selling, and indeed sales are growing, why would you purposely and artificially devalue the product? Apple would have to fight hard for years to get back their margins.
I would say windows is more the cadillac, once a very good company, then just started to add in too much crap and breaks down easily, expensive to repair, and wrapped in a pretty wrapper. I would say Macs are like asian imports(though homegrown) thought fully put together and needs little repair, run fine for a long time, and come on everyone has an asian fetish out there, you love mac long time. that even includes you ladies, once you’ve gone asian you don’t go caucasian.
These idiots don’t understand a Mac is actually cheaper.
I don’t have to go through details since everybody in this forums know why.
But tells a lot of those analysts professional quality.
There go another $15,000….
@courtjester
“But when times are hard like right now, a £349 laptop in Asda looks a lot more appealing to parents than anything Apple offers”
Depends how much they love their kids!
Hey CourtJester, do you juggle by any chance?
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Serious Question
@Max
“The UK is expeiencing a significant drive towards netbooks.”
First I’ve heard of it. My two teenage kids friends all want Macs.
Since when was “windows” a company, let alone a “very good” one?
Ladies and Gentlemen,
THAT’s what has been causing the recession.
This guy is obviously not a Mac user nor has he ever been in sales.
People buy based on perceived value, not just on low price. The perceived value of Windows-related products has been dropping for years. Conversely, when people just take the time to look it’s easy to understand the incredible value of Apple’s products.
People buy value if they possibly can and Apple understands this. This guy doesn’t.
i think the netbook is a serious threat to apple’s business model in the computer space. the price differential between a $400 netbook and the $1000 entry level macbook becomes too big. sure it is junk but it was much easier to convince people to upgrade from a $800 junk dell-laptop to a $1100 macbook. they easily saw what they were gaining for a mere $300 more. but now the price of a mac-laptop is 150% higher than that of the entry windows netbook. so i think a lot more people will think “not as good as a mac, sure, but for 400 it is good enough” and from anectodal evidence (growing shelf space in electronic markets, amazon’s computer top ten and a lot of people i see buying them) i would argue it is not a nascent category but a major future trend. we can all try to live in denial, i much rather hope that apple realises the change and has something up its sleeve in that space.
Yep, the important part of the headline is the tense.
Apple is selling them, not trying to sell them.
And they will continue to sell them because they are better and worth the price.
“The UK is expeiencing a significant drive towards netbooks. If the youngsters get hooked it will be some effort to make a regain.”
You don’t get hooked on a first kid’s bicycle with training wheels…it just a first bike.
When my daughter was ready, I bought her a first car…a six-year-old Maxima. Now, she has graduated engineering school, held her first job for three years, and just bought a new Mini Cooper S…for cash.
If this “hooked” logic was correct, I would still be using a 64k Radio Shack TRS-80.
Hmmmmm… just because this ash whole anal-sit cannot afford to purchase a quality Apple Macintosh computer – (which, by the way, lasts longer because Apple, like God – however you see God, G_D, god, Allah, Jack in the Box), don’t make no junk) –
I have yet to find a non-Apple computer product that has the feeling of quality and durability that I find in Apple products.
And as for Cattle-Lacks, I prefer an Aston Martin DB7 Vantage. Why you may ask? Because I drive one.
As for Apple weathering the “storm” – which one? The real one or the perpetrated one? My business partner was transferring $$$ for clients in the billions 3 minutes after the bailout announcement and hasn’t stopped. Where is it all going?
Subtle hint – it isn’t going back into the US.
Another subtle hint: the is no money disappearing – it is just moving to safer havens. And there are plenty.
Our desk in Singapore made 128% in three days and it continues.
Cheers.
BTW, I love the analogy of MSFT and cadillac – how apropos.
@J.Scott
“People buy based on perceived value”
Great point J but may I suggest you add the word “Intelligent” to the beginning of that sentence.
I know a helluva lot of people who buy Windows PCs…
Having said that maybe it’s because these uninformed people just don’t bother to do any research or they would know Macs are a better, more compatible option to ‘doze
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Price will always be the contentious issue with potential buyers, since MS et al have rammed the perception home.
That, however, does not mean that Apple will not, or does not, have customers. All of us here use Macs and will continue to do so, as will more consumers who are making up that 18% marketshare, for starters.
I can understand concerns about Apple’s future in dire economic times, but dropping prices is an admission of failure – and a vindication of the MS/Dell model instead. Can you see Steve even contemplating such a move?
I wouldn’t be surprised if there was a slight slowdown in sales as people are remembering the times of yore when they saved some money, but there should be no cause for desperate measures.
All in all, this ‘article’ is one of MS’s 15000 dollar hatchet jobs, and a crude one at that.
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ok. maybe i am missing something. from what i gather, netbooks are cheap laptops designed specifically for word processing and internet stuff. correct?
Cadillac (the car company) survived the Great Depression.
Apple will survive this depression.
(It remains to be seen if Cadillac, and their parent General Motors, survive. However, the market for, and other manufacturers of luxury cars will survive the current situation.)
Ross writes, “Not, however, if analyst Trip Chowdhry of Global Equities Research in Half Moon Bay is right”
Well that’s the important point. Chowdhry is an analyst. How often are analysts right about Apple ?
Is there any other company that so frequently makes the analysts predictions look ridiculous ?
Okay, I’m REALLY getting tired of this whole price issue on Macs.
If someone wants a $500 Mac, there are tons of them available… on eBay or Kijiji !!!
My son just went off to college and I wasn’t prepared to buy him a new MacBook. I was able to pick of a 14″ iBook in great shape for $300. I added some extra RAM, loaded it with OS 10.5 and he’s off to the races.
And why is he happy? The quality of a 4 year old Mac is STILL better than any PC laptop. And since Apple doesn’t change it’s styles, names etc. etc. every six months, no one knows how old the thing is or whether it was purchased used or not. And when he’s ready to move on in a few years to a new, or newer MacBook of MacBook Pro, we’ll be able to sell this iBook back on eBay or Kijiji and get roughly 50% of what we paid for it.
Not a bad deal at all, especially for a piece of consumer electronics.
“in this age of cloud computing and so forth”
What? Really? That is not true. We are not in an age of cloud computing. If you are going to throw words and terms around, at least have some sort of idea what they mean.
Steve drives a Mercedes SL and makes Macs
I paid $900 for an used Mac Intel 15″ Powerbook and my brother was wondering why I did that when a brand new PC Window laptop cost much less.
Non-Mac users just do not know the difference. Now, I have Mac and Window in one computer.