Is Apple plotting MacBook price cuts?

Speculation is rife that Apple's murky guidance to analysts earlier this week about falling profit margins means potential good news for consumers: the computer maker will slash prices on MacBooks in the run-up to Christmas. Apple Insider cites Piper Jaffray analyst Gene Muster, who believes Apple is readying its first sub-$1,000 (£500) MacBook to compete with the likes of Dell.

"We believe there is an 80% chance Apple will introduce redesigned MacBooks and possibly new MacBook Pros at lower price points," Muster is quoted as saying. "Specifically, Apple may re-enter the $999 price point (currently $1099) with the MacBook, or test the $1,799 price point with the MacBook Pro (currently $1999)."

That's a roughly 10 per cent price cut for the MacBook Pro and nine per cent discount on the MacBook model. Using the same calculation, and assuming Apple would extend any future price cuts to Europe (admittedly, a lot of ifs here), one could assume a MacBook might sell for somewhere near £625 and a MacBook Pro for £1,075 after September.

Currently, the cheapest MacBooks sell for £699, and the MacBook Pro starts at £1,299, according to the Apple online store.

Comments

[Ynda]

Surely the rumoured price drop will be in iTunes, not the Mac products, which seem to be selling just fine as they are!

[Barry Stocker]

iTunes does not make a profit for Apple, or certainly not a significant one. Apple set it up as a way of selling iPods, people who buy iPods are more likely to buy a Mac, so iTunes is an instrument for generating revenue from hardware sales.

[David Evans]

Apple "Pro" products (MacBook Pro / Mac Pro) are aimed at a working market for people who need powerful machines, not at the general consumer, so I hope that the shelf prices are only reduced on the consumer level stuff, as I don't want to worry about a reduction in quality on the high end stuff, which has earnt itself a reputation on putting quality over price. This reputation is fine, as people who need the pro end macs are willing to pay the extra money to know that their computers are built to the highest spec. As soon as Apple reduce the prices on those too, people may start to lose their faith.
However, MacBooks have made themselves popular as a fashionable laptop, especially among young people, and I do hope that these will become more available to the consumer, as more people using Macs would certainly produce more compatibility with Macs, and more Mac-based software being produced.

[Constantinos Michael]

What makes everyone assume iTunes is not making a profit? They are the #1 music retailer in the US (they sell around 12M songs a day) and a quick back of the envelope calculations suggests their revenues stand at around $4bn a year.

The music costs them 0.70 cents a track or so; if they spend another 10 cents per song for storage and distribution, that leaves a profit of about $800M. That's about 18% of their total operating income ($4400M.)

[Barry Stocker]

In reply to Constantinos Michael

http://www.lockergnome.com/news/2003/11/07/itunes-makes-no-profit-for-apple/

This refers to an Apple financial analyst conference in which Jobs is quoted as saying that iTunes makes no profit. I've check internet sources which claim Apple makes $ 100 000 000s out of iTunes, but they are based on guess work and supposition. For a CEO to simply lie outright about the source of a large part of the profit of his company is quite a big deal. Real evidence is needed for this suggestion, not speculation according to which Apple 'must' be making huge profits from iTunes.

[Bruce]

Well Barry perhaps you should check your evidence too as the article you posted is from 2003: only a few months after iTunes was built.

It would be very unlikely that they would have entered the profit within such a short time period. However it is very likely they are now making a healthy profit from iTunes.

[MSA]

The article linked to is from Nov 2003, and 4 months after iTunes was launched. It did not break the 1 million song sales per day mark until years later. I would not assume that you can base an analysis of their profits on remarks made 5 years ago.

[Jonathan]

In reply to Constantinos Michael

You forgot to factor in the amount Apple has to pay the record companies for the music - this takes up the majority of that 79p.

[Carl, London, England.]

According to the kind of hype that fuled the dotcom boom, a "weightless" model of selling downloadable content ought to be hugely profitable -far more so than record shops, which presumably do turn a profit. After all, isn't that why everyone invested in dotcoms...for their supposedly superior margins?

[Taylor]

Ynda,

"which seem to be selling just fine as they are!"

That is the common misconception. They are not selling as fine as Apple would like. Flashy commericals and consumer shows do not necessarily mean the product is a huge success in sales. Apple is not hurting. However, they are far from sitting on cloud 9, as many wrongly believe.

[James]

You all must know that it does not cost Apple
any more to build a Mac then it does to build a PC...
So who is being taken advantage of... A discriminatory
buyer must be willing to pay more...

[Hugo Chav]

The Macbook pro is too expensive, and the macbook too small, Either they have to build a macbook with 15in screen or build a cheaper Macbook pro,

Not convinced about Apple and enterprise as the laptop you see business people using in Airports, not the business class tycoons, but the corporate bulk buy, rest of us, is the bog standard 15in Dell, which is probably obtained at $400,000 per thousand. I don't see Apple going after those sales.

But crunch time economics mean that individuals will look twice at the Mac premium, for that reason Apple will have to build a modular laptop portfolio that they can stamp out cheaply, to conserve those margins.

[Constantinos Michael]

@Jonathan
The numbers I quoted are from the US iTunes store, which sells songs for about $1.00 even, but (reportedly) gives about $0.70 to the copyright holders (the record industry).

@Barry, as others point out, iTunes growth has been exponential - the only official metric I’m aware of, “Number of songs sold”, doubles every 12-18 months or so, meaning every year, they manage to sell as many songs as they’ve sold all their previous years. You can see how revenue accumulates quickly under such impressive growth.

[Frederico]

When are these prices suppose to start dropping? I am off to the states to buy myself a macbook of some sort, is it still worth buying or is it better to wait?

[Partners in Grime]

Decreased metal-clad MacBook prices. Awesome!

[Andras Middleclass from Southampton]

I've just sold my MacBook last week. It was 21! month old, but still more powerful than an average laptop on the market (C2D, 2GHz, 2GB), apart from the integrated Vcard.

My decision to sell it was purely financial in nature - they pay good (silly) money for these used machines. Unfortunately, after such a stylish product, not just Dell, but almost nothing else but another Mac product will do.

So, I will buy a new, aluminium MacBook in six weeks. By that time the new lines will have come out. Possibly a new MacBook Pro, a new MacBook and maybe a device with touch-screen or a netbook, or their combination.

Yes, Macs are expensive. They might be slightly overpriced for what they are. But does it matter, if you have a stylish and reliable computer that keeps its value exceptionally well? For me, this new laptop will cost an extra £150 and I will get new features such as multitouch trackpad, a newer processor, more RAM, a newer OS, newer videocard and a hard drive with larger capacity. Oh, and who knows, what else.

After all, Apple sets trends. I will look slightly pretentious but cool and rich, while most of my friends keep losing a small fortune on every boring and average laptops they get.

I didn't feel the need to upgrade my white MacBook from Tiger to Leopard but now I am looking forward to Leopard or, eventually Snow Leopard, whichever comes with my new MacBook. Others dread that sooner or later they will have to upgrade to Vista or Windows 7.

It sounds snobbish, but just as I cannot afford to have some Ford Fiesta (so I drive German executive cars that I replace regularly), I CANNOT afford not to buy Macs. Don't think that these 'false economy'-decisions will not hit you hard in the end, especially with computers (and cars for that matter).

So people of Britain, if I were you, I would wait for those cheaper MacBooks and buy one (each). They WILL come out in October the latest and they will blow your mind. You will get that 100-150 pounds premium back over time.