Why Apple needs a $700 MacBook Air
High margins still doable by switching to Intel's 'Bay Trail,' argues analyst
Computerworld - Apple has been able to maintain high prices for its Mac personal computers, and thus its high margins, even as competitors have jumped into a pricing pit that gives them little in return, according to analysts.
But with overall PC sales, Macs included, drooping in 2013, Apple may use the opportunity to do what its competitors already have: Lower prices.
It won't do that across the board, argued Ezra Gottheil, an analyst with Technology Business Research. Instead, it will deliver a a-cut-rate-for-Apple notebook.
"They could have a Mac with nice margins at a lower price point, and they may well do that," said Gottheil. "I think they will. They could easily do a Bay Trail MacBook Air in the $700 price range."
Bay Trail is the nom de guerre of a platform of Intel system-on-a-chip (SoC) silicon from the Atom family, a line of lower-powered x86 chips targeting smartphones and tablets, but also eyed by makers of so-called 2-in-1 devices and some traditional clamshell notebooks, that costs hundreds less per unit than the more powerful Haswell line now inside the MacBook Air.
Gottheil's thesis rests on the cost reduction Apple would reap by going with Bay Trail, which in turn would let it cut the price of an entry-level MacBook Air without skimping on other specs or components, and most importantly, without reducing profit, a move that would be anathema to the Cupertino, Calif. company, which jealously guards its margins.
Historically, Apple's Macs have been revenue-making machines, with an average selling price (ASP) more than twice that of other systems, the vast bulk of them powered by Microsoft's Windows.
In the September 2013 quarter, the Mac ASP was $1,230, down 6% from the same period the year before. (Mac ASP rebounded in the December quarter to $1,322 on the back of brisk sales of more expensive MacBook Pro notebooks.) Meanwhile, PCs overall had an ASP of just $544 in the September quarter, according to estimates compiled by Charles Arthur of the U.K. newspaper The Guardian.
Independent analyst Horace Dediu weighed in Thursday with charts and graphs that illustrated the Mac's resistance to the industry-wide downturn in ASP.
"The point being that [Apple's] violation of the axiomatic price erosion rule in PCs is not anomalous," Dediu wrote on his Asymco website. "It suggests something about the violation of the same rule in devices. It suggests that perhaps the company does not respond to the same market forces."
In fact, it doesn't, echoed Gottheil, who explained how Apple has avoided the plunge in prices -- and thus, profits.
"Apple says, 'This is the Apple experience,'" Gottheil said in an interview Thursday. "What I'm getting is a PC experience that will last me quite a few years. And for me, it will be a better experience than from other vendors because it's hardware, software, services, support, the whole thing."
All those factors, particularly Apple's software -- OS X as an operating system, its now-free iWork productivity programs, its iLife creative suite -- are important to acknowledge, said Gottheil. Not because they're necessarily better than the competition, although Apple's fans would argue that they are, but because they're included.
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