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Apple's new iMac is $200 cheaper -- and slower

Another sign that volume matters to CEO Tim Cook, says analyst

June 18, 2014 01:46 PM ET

Computerworld - Apple today added a new entry-level iMac to its line, pricing it 15% lower than the previous cheapest model but dramatically scaling back the all-in-one's performance.

"There's a lot more attention paid to volume at Apple," said Stephen Baker, an analyst with the NPD Group and an expert on U.S. retail sales. "The earlier MacBook Air price changes, the amount of discounting that's going on with the iPad and iPhones as well, it feels like there's a lot more attention at Apple to getting to more mainstream pricing and more mainstream customers."

The new 21.5-in. iMac is priced at $1,099, $200 less than the still-available earlier configuration with the same-sized screen. Apple retained all other stock models of the iMac, including the two existing 21.5-in. versions -- at $1,299 and $1,499 -- and a pair with a 27-in. display ($1,799 and $1,999).

To get to that lower price, Apple significantly scaled back the new iMac's performance. Rather than use the faster quad-core processors found in the more-expensive iMacs, the $1,099 configuration relies on a dual-core Intel Core i5 running at 1.4GHz.

That's an unusual tack for Apple: Typically it reduces prices as a model ages, but retains the same components, or even improves them with, for example, a boost to the processor.

As others have pointed out, some of the new iMac's specifications exactly match those of the MacBook Air. That lightweight notebook also packs the same 1.4GHz Core i5 processor, and uses the same Intel HD Graphics 5000 chipset.

That won't matter to the customers Apple's targeting, said Baker. "I don't think they'll care," he said. "It's still a Core [processor]."

Instead, those customers care about price. And there, even with the lower cost, Apple is still not competitive with other all-in-ones of the same screen size.

"In the first five months of this year, the average price of a Windows touch-screen all-in-one with the same kind of screen -- 22 inches, 23 inches -- was $770," Baker said. "The average for non-touch Windows all-in-ones was under $500. So Apple's $1,100 is still pretty high."

As Baker noted, Apple has recently cut prices on other Macs. Two months ago, the Cupertino, Calif. firm quietly refreshed its MacBook Air line, dropping prices by $100 on all four stock models and offering a sub-$900 Air to the public for the first time.

Combined with an earlier cut in October 2013, prices for the 13-in. MacBook Air -- the most popular screen size -- have dropped 14% to 17% in the last eight months.

All that fits with the strategy Baker sees at work.

"It's all about how they wanted a lower-priced entry point into the segment," Baker said of the cheaper iMac, comparing the new $1,099 model to the $899 11-in. MacBook Air. While Apple may not expect to sell a large volume of the lowest-priced desktops and notebooks, the new benchmarks are definitely designed to get customers to look more favorably at the more powerful, and pricier, models. It's all about the upsell.

Apple's new iMac
Apple introduced a lower-priced iMac today at $1,099, 15% less than the previous entry-level model. (Image: Apple.)

"And will that price point hold?" asked Baker, referring to the discounting that third-party retailers, including Best Buy, now often do to sell more units.

Desktops like the iMac are not on life support, Baker maintained, even though much of the market's attention has turned to thin, lightweight notebooks, various 2-in-1 configurations that mix and match elements of tablets and personal computers, and most of all, to mobile devices, including tablets and larger-screen smartphones.

"There's clearly a market for desktops, all-in-ones and towers," said Baker, of the more traditional form factor, a looming case usually hidden under a desk. "There's still a market for the central computer that everyone in the household might use."

The new 21.5-in. iMac is available immediately at Apple's online store, in its own brick-and-mortar stores, and those of select resellers.

covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at Twitter @gkeizer, on Google+ or subscribe to Gregg's RSS feed Keizer RSS. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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