Apple's laptop price cuts a concession to recession, say analysts

Prices chopped up to 28%, but company still not ready to play in the low-end

Apple's price reductions in its notebook line this week show that the company, which has historically been leery of dropping prices, is not immune to the crumbling economy, analysts said today.

On Monday, Apple reduced prices of its MacBook Pro and MacBook Air laptops by between 6.3% and 28%, with the smallest cuts at the low end for the 13-in. MacBook Pro and the largest for the high-end MacBook Air.

"The cuts show that Apple isn't immune to the way the market is moving," said Charles Smulders, an analyst with Gartner.

"They were a concession to the economy," added Ross Rubin, an analyst with retail market research firm NPD Group. "I see this as more of a defensive move."

The two 13-in. MacBook Pro models -- the revamped and renamed MacBook -- received cuts of $100, to $1,199 and $1,499, or reductions of 7.7% and 6.3%, respectively. The mid-range models, which sport a 15-in. screen, are now priced at $1,699, $1,999 and $2,299, representing cuts of 15%, 13% and 8%. And the 17-in. MacBook Pro dropped from $2,799 to $2,499, a 10.7% cut.

Reductions on the MacBook Air brought prices for that thinner model down to $1,499 and $1,799. Apple trimmed $300 and $700, or 16.7% and 28%, respectively, from the Air's price tags.

The larger cuts in the mid- and upper ranges was predictable, said both analysts.

"It's not surprising that we saw the price reductions on the most expensive hardware," said Rubin. "That's where Apple has more margin to adjust."

"Margins are more generous in the higher-end products," echoed Smulders. "They're significant there, given the way the market is moving."

But Smulders was disappointed at the lack of attention to the lower end, where Apple retained the $999 price point of the last-generation, plastic-cased MacBook, now the only model under that nameplate. "What we didn't see was a sub-$999 product," he noted. "That was disappointing, but at some point we'll have to see Apple lowering that entry point."

The company's long-stated position -- it has repeatedly said it won't play in the netbook category, with company executives spurning the idea and heaping scorn on the existing hardware -- remains in place, said Rubin. "These cuts, which weren't particularly at the low end, aren't an answer to the netbooks from the larger PC makers," Rubin said, referring to the lowest-priced MacBook Pro, which now costs $1,199, and the $999 older MacBook. "It's just never been in the company's character to go after that entry-level buyer."

While Smulders agreed that Apple's cuts weren't bold enough to put its wares even close to the prices of Windows-based netbooks, he thinks Apple needs to move into that arena this year or early next. "We made a prediction about 18 months ago that Apple would double their market share, but to do that, they would need to deliver a sub-$800 Mac to the marketplace," Smulders said. Gartner's sticking to those predictions. "I think they'll do something in 2009 or 2010," he said. "The declines in ASPs [average sales price] in the industry have been significant, and the economic environment is tough. Apple isn't immune to all that."

"It's certainly a challenging time for a lot of consumers," said Rubin, whose firm tracks both online and brick-and-mortar retail sales of Macs, including Apple's sales in its own stores. "Apple does very well in the $1,500-plus segment of the market, but consumers are more value conscious now."

Apple's revamped MacBook Pro notebooks went on sale Monday at the company's online and retail stores, and will percolate through to its authorized dealers in the coming days and weeks. Amazon.com, for example, is only taking pre-orders for the new models today.

In the meantime, sellers have dropped prices of the older laptops remaining in inventory. Amazon.com, for example, currently lists the 13-in. unibody MacBook for $1,094, a cut of about 16% from the Sunday price of $1,299, while Best Buy has the earlier version of the lowest-priced 15-in. MacBook Pro at $1,599, a $400 price cut since Monday.

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Gregg Keizer

Computerworld
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