Windows PC box assemblers’ margins squeezed as Apple rakes in stellar profits

Apple Store“Apple’s updated $999 MacBook, $1,199-and-up iMac and $599 Mac Mini models may look sharp, and some add such thoughtful features as a wireless mouse that includes the ‘multi-touch’ technology first seen on the iPhone. But Windows-based computers can cost half as much — even before you factor in Apple’s inflated charges for memory and storage upgrades. Since there’s a recession going on and we’re all smart capitalists, buyers will undoubtedly switch to more affordable alternatives. Clearly, Apple is doomed,” Rob Pegoraro reports for The Washington Post. “Except it’s not.”

Pegoraro reports, “In its quarterly earnings announcement Monday, the Cupertino, Calif., company blew away Wall Street’s expectations, shipping more Macs in a quarter than ever before — 3.05 million — for a $1.67 billion profit. The New York Times noted that ‘Macintosh sales have now grown faster than the rest of the PC market in 19 of the last 20 quarters,'”

“Analysts and critics can insist that Apple has to ship a netbook to stay competitive, and Mac shoppers can wish that the company would turn its considerable talent for design to that category of computer. But Apple doesn’t have to do that any more than Cadillac owes the world an $18,000 subcompact… As grotesque and incomprehensible as Apple’s existence may seem to people content with an affordable PC, the company seems to have taken up residence at a spot in the market that other vendors seem unable to barge into,” Pegoraro reports.

“Manufacturers of Windows-based PCs can craft higher-end models… But they can’t do much to differentiate the software on those deluxe models — whether it’s Windows Vista or the new Windows 7, shipping Thursday — from what they ship on the $400 boxes lining mass-market retailers’ shelves. Apple won’t license Mac OS X to them,” Pegoraro reports.

“This could be a self-reinforcing trend: As PC builders keep having their profit margins squeezed, they have fewer resources to devote to high-end consumer products, while Apple’s focus on the most profitable end of the market leaves it with ever more money to dump into product design,” Pegoraro reports. “Or buying small islands.”

Full article – recommended – here.

MacDailyNews Take: Clearly, Pegoraro gets it.

Macintosh is the aspirational brand in the personal computer market and Apple is smart to keep it that way.MacDailyNews Take, October 24, 2008

33 Comments

  1. Apple have certainly got the balance right. After the earning conference call I was expecting the unit cost for the new mac products to go down. It looks like the pricing is the same for the MacBook and the Mini which was disappointing. I assuming they were referring to the iMac updates as being responsible for the drop in margins.

    Hopefully Apple will trim the prices in the New Year. Then they will be following the same path as the iPod. Reducing prices as volume grows. Dell and others dropped prices to drive market share. Apple do it a bit differently – they drop prices once the market share increases to protect their margins.

  2. No, he does not get it! The HP Voodoo line has style for style sake (questionable style on top of it) but not style for function sake. Apple understands that industrial design is not just about style and glitz but style and function. Combine that with an OS that also has style and function and then you get it.

  3. Apple doesn’t lower prices on hardware; it increases the value you get for the price. Compare current Macs to the Macs we were using when OS X debuted. They cost the same, pretty much, but the value now is unprecidented!

  4. And this is why Psystar is putting up the fight. These computer manufacturers would kill to be able to sell a computer with higher margins. They think they’ll make money on a computer running OSX that undercuts Apple prices. Fools.

  5. …”Apple understands that industrial design is not just about style and glitz but style and function. “

    Exactly right. And nowhere can it seen better than in the intro video for the new iMac. Johnathan Ive (Senior Vice-President for Design) talks about the design of the new iMac with such passion and conviction that you can clearly see his (and his team’s) relentless desire to design a perfect product in every way.

  6. Well my advise to manufacturers is to stop depending on MS for their OS. Want to succeed? Do what Apple did. Change your OS. Right now, one can get quality Linux platforms. Put in a little effort and unclutter the front end. A company like HP should be able to do this. And you get 2 in one. A server and a workstation.

    There is nothing you can’t do on Linux that can be done on Windows nor Mac for that matter.

  7. I have loved the Mac since I first owned one in 1984, and not the 1MB model either. I make my living writing M$ software, but I write Mac apps because I love the system.

    Why aren’t people talking about the $999 OS X Server – Mac Mini?

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