Apple's MacBook Air price cuts make it tougher on Windows ultrabook makers

Computerworld - Apple did something very unusual Monday: It cut prices.

As part of its long-awaited notebook refresh, Apple dropped the price of three of the four models in its signature MacBook Air line by $100, representing cuts of between 6% and 8%.

The new laptops, and prices, were announced at Apple's Worldwide Developers conference.

Apple rarely reduces prices on its Macs, and instead prefers to keep the dollar figure static while boosting performance and storage capacity with newer processors and graphics chipsets, more RAM and larger hard drives or SSDs (solid-state drives).

The last time Apple reduced prices of the Air was in October 2010, when the company introduced the first sub-$1,000 model, a $999 11-in. laptop with 2GB of memory and a 64GB SSD.

Before that, it's hard to track down an Apple price cut other than the mid-2009 6% to 28% discounts on all then-available MacBook Airs and MacBook Pros. That move, analysts said at the time, was the company's reaction to the crumbling economy and consumer unrest.

"For them to take $100 off, that's a pretty potent statement," said Frank Gillett, an analyst with Forrester Research, in a Monday interview. "They're cutting prices and improving the hardware. That means that there was enough room in the margin before to return some to customers. And it shows that they've recouped all the setup and tooling costs, so they can set prices more marginally."

That doesn't bode well for rivals, especially the OEMs (original equipment manufacturers) looking to cash in on the thin-and-light category with Windows-powered ultrabooks, Intel's marketing label for MacBook Air competitors.

"Intel and Microsoft are working really hard to convince buyers that Windows 8 and laptops, as well as convertibles, can compete with the Air," said Gillett, referring to both features and price. "But the analyst reaction has been mixed so far. [Ultrabooks] remain to be proven."

More importantly, Gillett questioned whether Windows OEMs could create an ultrabook comparable to the Air and undercut Apple's prices.

Apple has been making the Air for more than four years, noted Gillett, and that has given the company experience in design, manufacturing and cost-cutting that other companies don't yet have. "They now have the volume [in sales] and the economy of scale [in manufacturing] that others may never be able to hit," Gillett said.

Those OEMs also work at another disadvantage, as they must pay Microsoft for each Windows license.

Windows ultrabook makers, in other words, are starting in a hole, and unless they can convince buyers to snap up the new notebooks, they may have a hard time reaching the manufacturing scale -- and thus the lower costs -- that Apple just demonstrated by cutting prices.