August 6th, 2008

Yes, Macs are expensive ... so what?

Posted by Adrian Kingsley-Hughes @ 8:01 am

Categories: Apple, Hardware, Industry, Mac, Marketing

Tags: Apple Macintosh, Apple Inc., Desktops, Microsoft Windows, Hardware, Operating Systems, Software, Adrian Kingsley-Hughes

According to Joe Wilcox, a Mac notebook will cost you about twice as much as a similar offering running Windows. So what?

Today I contacted Stephen Baker, NPD’s vice president of industry analysis, about computer average selling prices at retail. That HP notebook is right on mark: ASP for retail Windows notebooks is $700. Mac laptops: $1,515. Yeah, right, they’re more than twice as much. But there’s more: The ASP for Mac desktops is more than $1,000 greater than for Windows PCs, and Mac desktop ASPs were higher in June than they were two years ago.

Here’s the NPD data to back up the claim:

 Loading ...

And there’s no no doubt that you can get, dollar for dollar, more hardware on a Windows PC than on a Mac. Here are two systems that Wilcox compared:

• iMac: $1,199; 2.4GHz Intel Core Duo processor, 20-inch widescreen display (integrated), 1GB DDR memory, 128MB ATI Radeon HD 2400 XT graphics, 250GB hard drive, 8x double-layer DVD burner, Bluetooth 2.1, 802.11 g Wi-Fi, Webcam and Mac OS X 10.5.
• Inspiron 518: $739 (after $150 instant savings); 2.4GHz Intel Core 2 Quad processor, 19-inch widescreen monitor, 3GB DDR memory, Intel GMA X3100 graphics, 500GB hard drive, 8x DVD burner and Windows Vista Home Premium Service Pack 1.

Wilcox then offers  stark conclusion:

If Apple is going to continue its market share gains, or simply maintain that 8.5 percent U.S. share, prices must go down and configurations bulk up. The math is simply undeniable.

 Loading ...

Now, I agree with him about the price difference between Mac systems and Windows systems, but when it comes to this conclusion I’m afraid that I have to disagree. Why? Well, here are some reasons why:

• Macs have never been cheap compared to Windows PCs, as the NPD data that Wilcox offers proves. Yet, this hasn’t been a barrier to increasing Mac market share. People are obviously willing to pay extra to own a Mac (there are plenty of parallels in other markets - Ford vs. BMW, Timex vs. Omega …).
• Apple is unlikely to steer the business in the direction of high volume, razor-thin margins like the Dell and HP. Even the notice by Apple to investors that margins would drop to 30% in FY 2009 doesn’t indicate a huge change of direction for the company.
• Another point worth making here is that while the average price for a Windows desktop might be $550 and for a notebook $700, there are plenty of machines available that cost a LOT more than this.
• Comparing an iMac to an Inspiron isn’t exactly fair since the Apple system is an all-in-one. A better comparison can be made between the iMac and Dell’s XPS One which start at $1,299.
• The tax that users are willing to pay to have the Mac OS makes the Windows tax seem insignificant by comparison. But then again, Apple is providing an alternative to what many consider the default (at the moment Linux is not on the radar of most consumers). Alternatives normally cost extra.

 Loading ...

Maybe the likes of Dell and HP need to put their thinking caps on and figure out why, despite offering cheaper alternatives, people are willing to pay more for a Mac.

Thoughts?