Netbooks: The Race to the Bottom Has Begun
Seems everyone’s talking about netbooks these days. So I will, too since I’ve seen so much punditry of late that says Apple can’t charge their usual prices anymore, the economy is in the dumps, netbooks rule, Apple can’t ignore the market, etc.
Yes, we see a lot of figures going around about millions of netbooks sold, but what’s it mean to the bottom line? Are Acer, HP, Lenovo, etc. showing more profit from these things? These same companies will sell you a notebook that’s supposedly half the price of Apple’s, but that’s not where the money is. It’s cutthroat down there as each vendor tries to shave another penny off the price. They hope to draw you in with the price and up-sell you.
Of course, netbooks use lower-cost components than cheap laptops, but they’re priced accordingly. If there’s precious little profit in a $699 laptop, I find it hard to believe there’s a lot of money in a netbook priced $250 less. And they’re getting even lower than that.
With the recent HP and Lenovo price cuts, it appears the big guys are shaving what’s left of the netbook’s profits. Won’t Acer, MSI, etc. have to follow suit? Yes. We’ve seen this in the PC industry time after time. What’s the point in this race to the bottom anyway?
I think netbooks are primarily just the new cheap laptop. I can imagine someone shopping by price believing that $700 is a bit much when they can get something similar for two-thirds of that. After all, we’re talking about a Windows XP machine (sorry, Linux), it’s going to look “the same” to a lot of uninformed buyers. It wouldn’t surprise me if HP and Lenovo would prefer not to even play here, but they have no choice because if they don’t draw in that price-conscious user they can’t up-sell them to something better now or in the future.
However, the same rules don’t apply to Apple. While it’s possible to imagine someone thinking a netbook is “as good” as a cheap laptop, I don’t imagine any user thinking the same when comparing a netbook and a low-end white MacBook. No way. They’re worlds apart. I believe any user allegedly buying a netbook instead of a MacBook was never getting the Mac anyway. Apple knows this. If they get in this game, it will be with a complete product — more expensive than most netbooks — from which they’ll make a reasonable profit and not have to hope for up-selling.
With the netbook, the PC industry may very well be creating a new monster. It seems likely netbooks will take sales from the low-end laptop market. In other words, all these PC makers are cannibalizing their low-margin product with something just as low-margin, if not more so.
And what if, instead of cannibalization, the netbook has actually created a new category of buyer? Someone who wouldn’t spend $700 on a PC but will spend up to $500. If so, then the PC industry has two razor-thin-margin products. I’m not sure how this is supposed to be a Good Thing™ for them. The PC netbook could be the hardware equivalent of Facebook: millions of users and no way to make money.
This is going to be fun to watch.
Eric on December 15th, 2008 at 5:08 pm
I am 100% mac, that said, I just ordered up a samsung netbook. I am very excited about it. I used a friends ACER on a recent trip and other than windows, loved it. It did everything I needed.
It’s about portability and simplicity. It’ll be my reader and used to keep on top of a small network of sites I have.
Over the last couple of years I had a mini and two macbooks die on me, motherboard, hard drive, now one yet to be determined. “Go to the local macstore” does NO good as I travel out of the US. It’s as if great service options are to make up for frustrating hardware failures.
I don’t think apple will even touch this area, and think that wise. I would rather see them keep focusing on what they already do, just please pay more attention to quality of components, I am willing to pay for it.
Michael on December 15th, 2008 at 5:27 pm
I like this article. I’ve been debating with myself about whether netbooks are really worth going after for Apple. I think you are right about how low the profit margins would be for these products. I’m sure that we would see the big PC makers issue statements about how this market has grown x % and now tops x millions of units… but how much does it add to the bottom line? That will be interesting.
Kurt Settles on December 15th, 2008 at 7:30 pm
I’ve got a MacBook and an Acer AspireOne netbook. After using the netbook regularly on a recent business trip, I returned home pining for my MacBook. Netbooks are not comfortable to use, have tiny screens, underpowered processors, and should not be considered a replacement for any full-power notebook/laptop computer, Apple or not. Mine, while it fits wonderfully, on the seatback tray in front of me while on the plane, has barely enough oomph to play video fullscreen. The standard 3-cell battery won’t power the Acer long enough to play a full-length feature film. For a person that wants to use one exclusively for web surfing (with limited or low-resolution video), email, and light word processing, it will be fine, especially when you add an external monitor and mouse. Otherwise, a person would be better off buying an iPod Touch or iPhone, which is probably as close as any Apple product will come to a netbook.
dave on December 15th, 2008 at 9:17 pm
So what do you think about so many people getting netbooks like the Dell Mini 9 just to turn around and slap OS X on it?
That’s my plan. Seems like tons of others have the same idea.
What does that do to Apple’s future netbook market when you can get a Dell running Leopard for $349?
Tom Reestman on December 15th, 2008 at 9:33 pm
Dave,
“So what do you think about so many people getting netbooks like the Dell Mini 9 just to turn around and slap OS X on it?”
So many people? People have bought PCs to “slap OS X on it” for a while. Relatively speaking, it’s a small number; it hasn’t drug Apple into any of those markets, either.
tom on December 15th, 2008 at 10:24 pm
netbooks own. I’m writing the family christmas letter on my msi wind right now. I’ve been sitting here for 2 hours and still have 3 and a half left in my 6-cell battery. the keyboard is just as comfortable as one in my gigantic, ancient dell laptop or the full-size keyboard i use at work with my imac.
i don’t know if netbooks are really creating financial problems for pc producers, and frankly, i don’t care. I was able to buy a little laptop that out-cutes all the macbooks down at the coffee shop for less than 500 bucks. if msi or dell go down, i’m sure that plenty more chinese-manufactured laptop makers will swoop in to take their place.
Don on December 15th, 2008 at 10:27 pm
You also forgot to consider the other elements of buying an Apple product – hidden costs:
- Apple logo tax
- Steve Job tax
- Apple smell tax
- Apple employee smiling tax
- Apple store decorating / architectural tax
By then, Apple’s “netbook” is what you have in today’s Macbook!
Onetrack on December 15th, 2008 at 10:48 pm
The thing is, people are buying the MSI Wind in droves because it makes a perfectly useable, excellent macbook-nano, it runs osx faster than it runs xp home and it is very osx friendly.
For more information, go to http://www.msiwind.net
Kes on December 15th, 2008 at 10:50 pm
You’re missing the point. Most netbook buyers have a full-sized laptop for when they’re really trying to get things done. At the same time, they have a netbook for taking with them when they’re going to the beach, or going out for coffee, etc, where a full-sized notebook starts to get cumbersome. There’s plenty of room for both, especially if Apple were to step up to the plate with a wimax or or hsdpa card. There’s room in Apple’s line for a $400-$500 netbook, and it wouldn’t cannibalize profits
tom on December 15th, 2008 at 10:55 pm
Stop asking apple for what you think you want, and wait for them to tell you what they want you to want.
Garrett on December 15th, 2008 at 10:56 pm
I can’t help but think that this article missed the boat. I’d explain more fully, but comments #1 and #3 sum things up nicely.
We love our Aspire One. I have it set to dual boot Ubuntu 8.10 and Windows XP, as a few websites where my wife likes to watch shows (ABC) don’t support Linux desktops as of yet. I don’t know why “we’re talking about a Windows machine”, since you can’t game on the thing 99% of people wouldn’t functionally notice a difference…except they’d no longer need to worry (or be blissfully ignorant) about Wintel security issues…
Fun to watch? on December 15th, 2008 at 10:58 pm
I love speculation…it’s so much fun. If you think this isn’t going to affect Apple then you’re smoking the good stuff. You’re right in one thing though, someone that purchases a netbook was probably never going to get a MacBook anyway. However, you’re ignoring the fact that someone who chooses a netbook over an XPS was probably never seriously considering the XPS in the first place. But that’s not the point…the point is that the netbooks add value, and also provide a product that wasn’t previously available. Dell was recently offering the Dell Mini for $100 if you purchased an XPS notebook over $1000. And here’s where Apple runs into a problem. In the netbook vs macbook match up, there’s little to compare…you’re in apples vs. oranges realm. But when you compare an xps + netbook for $1100 vs a macbook you’re in a completely different ballgame: 2 computers for the price of one. Kind of a no-brainer, eh? And that’s the point – nobody is cannibalizing anything here. It’s about adding value for your customers and providing the best bang for your buck in an environment that demands it. Think about it – mommy and daddy get a new XPS for the house, and get a second notebook for the kiddies for just $100. Or what about the issue or portability? People might decide to pick up a second computer for traveling….again not cannibalism – we’re talking about picking up a second machine (or going w/ a portable netbook for $250 instead of going for the Macbook AIR for 10 times the price.) There’s also the idea of having an extra notebook in the kitchen or living room to hop on, which is why my xmas present to myself this year will be a netbook. Oh, let’s also not forget the 5 billion people on this planet that cannot afford a $1500 laptop. Leave it to someone on a site called theappleblog.com to make the argument that providing value and delivering a notebook for $300 is actually a bad idea….HILARIOUS.
LeoBatfish on December 15th, 2008 at 11:08 pm
As a tech consumer (and NOT a tech shareholder), I have little interest in whether or not the manufacturer is making a profit. Over the past three decades, I have seen little correlation between manufacturer profit (or even loss) and product quality. If a company chooses to shave profits, I have no problem with that, because “that much less money in their pocket” = “that much more money in MY pocket”.
And yes, I agree that the netbooks (or any other comp in that price range) do indeed create “a new category of buyer”. Just like PC makers long ago created a category called “laptops for people who can’t afford $1000″, a category whose buyers add up to a LOT of non-Mac users.
One of my disappointments since 1984 (when I bought my first Mac) is that the company making the “computer for the rest of us” has always assumed that “the rest of us” are people to whom money is no object. FWIW, I am still mainly a Mac user . . . but the key reason for this is that my employer paid for it. Out of the last ten or so computers that I bought with my own money, only one was a Mac, and that was mainly as a demo unit for my students to use (so that they’d realize that Macs have come a long way since the original “fruity iMacs”, which was all that my classroom had at that time).
And last, I’ve had bad luck losing things when traveling (which is also the reason why I use $25 SanDisk MP3 players instead of an iPod — that and the fact that I shun proprietary formats for consumer reasons). And I would be MUCH less nervous about toting around a $300-ish netbook than even a white MacBook which cost three times that.
Joey on December 15th, 2008 at 11:11 pm
In reference to #12’s comment… it’s called an iPhone or iPod touch. I see no need to pick up a cheap PC netbook when I can use my phone for the same basic thing.
Kes on December 15th, 2008 at 11:17 pm
@Joey
Maybe it’s because I don’t have huge hands, but I find that I can type about the same as full keyboard speed on my Eee, which is something I can’t do on my ipod touch. The netbook market is not synonymous with the pocket device market.
Fun to watch? on December 15th, 2008 at 11:33 pm
#15..I would hope that if you paid $300 (or $400) for an iphone, that it could at least do the same things as a $250 notebook.
wait a minute…on an iphone, can i…
view flash-based websites? nope
edit word docs? nope
…edit any docs? nope
copy/paste? nope
multi task? nope
install any application i want? nope
change my background? nope
delete all the icons on my desktop? nope
instant message across different networks? (even messaging on single networks suck) nope
video chat? nope
connect to bluetooth devices? nope
replace the battery? nope
You must be retarded if you think it’s possible to do the same things on an iphone than on a netbook. I have an iphone, and while it’s an excellent smart phone (despite its flaws), I’d shoot myself the day I had to rely on it as a computer. You must also think I’m stupid if you think I consider your post to be a legitimate response instead of a failed attempt at defending the un-defendable.
Wyatt Lehmenkuler on December 15th, 2008 at 11:44 pm
Hi,
I own all macs, but since seeing these really cheap netbooks, I have seriously been considering getting one. I think it would be great to have if I have to send one of my Macs into the shop. In addition, these could be great for traveling. My only problem is that I’m unsure what type of case I should use as a normal laptop bag would be way too big for these little guys. And if I did get a much smaller case, wouldn’t it look like a ladies purse?
Regards,
Wyatt Lehmenkuler
Tom Reestman on December 15th, 2008 at 11:56 pm
Some quick comments:
** For those of you who think I’m missing the point of netbooks, or don’t understand why people buy them, it doesn’t matter. My article stated it didn’t matter if they stole share from cheap laptops OR if there’s a new category of buyer. The fact remains that a company experiences a cost of designing, manufacturing, marketing, distributing, and supporting these things. In the real world, a company would wish to make all that back and then some. Therein lies my question.
** For those of you trying to explain how netbooks have or add value, please find in my article where I argued against the value a netbook could provide. I can certainly see their appeal. But, again, this has nothing to do with turning a reasonable profit.
** Finally, for those of you that don’t care if the company makes any money, it’s more money for you, etc. Well, I don’t know where you work for a living, but I hope you have higher expectations of your employer. If they’re barely getting by with a “we lose money on every one but we’ll make it up in volume” strategy, don’t be surprised if you’re bounced to the curb.
In fact, for those of you that really love netbooks and what they can do, why WOULDN’T you be concerned about whether the business model is sustainable?
Dave on December 16th, 2008 at 12:36 am
“The same rules don’t apply to Apple”, uh.. yes they do. Apple has and always will be a company out to make a profit from the retard, consumer, prosumer, snob or whomever has the bills to hand over. Saying that the same rules do not apply to Apple is nonsense and nothing more than a lowly fanboy attitude.
Apple need to lower their prices by a hundred or more, not by ten bucks, in order to continue to grow their market share. If they do not, they will slowly sink again into the sub-5% market that they only recently crawled out of.
If Apple lowered their prices (BEFORE any discounts,) offering a netbook at $300, Mac mini at $350, iMac and Mac Book at $500, Mac Book Air at $800 and Mac Book Pro / Mac Pro at $1000; without a doubt their market share would increase from 8% to 18% within 6 months.
They CAN afford to do this and they would still profit. So why don’t they?
GREED.
Dan on December 16th, 2008 at 1:46 am
Wyatt, I use a zippered portable dvd sleeve/case by bodyglove, it has no handles, you are correct, anything with handles looks like a purse and gets giggles in the boardroom. the larger laptop bags are ok too, cause you can fit other stuff in there with your netbook (lunch, books etc).
Fred on December 16th, 2008 at 1:58 am
Dave,
Apple does not have to play in the commodity computer market — any more than Bang & Olufsen, Krell, Linn, Conrad-Johnson, and Rega have to play in the commodity audio market. You don’t see Rolls Royce and Maybach rushing to make low-cost cars to compete with Hyundai and Kia.
There are many consumers who are unconcerned about whether a notebook computer costs $600 or $1500. They want to know if it will make them more productive and happier. Being able to get the service and face time with someone who’s several notches above the “Geek Squad” means a lot to those who view the system as a tool with which they do their work. They also recognize that, where money is an issue, the resale on an Apple system means that their total cost of ownership is usually a lot less. Go spend $700 on an HP laptop today and spend $1500 on an Apple laptop. In a year, sell each on ebay and then tell me how much you saved with the HP.
Apple doesn’t lower prices for several reasons:
1. Profit. They are a for-profit company and they want to set a price point that maximizes their profit. Want to complain? Complain about the fact that you can get a five-license family pack copy of OS X for under $200 and Microsoft is gouging people that much for one license. Another cost of ownership item to consider.
2. Supporting expensive retail stores and service centers. Their customers like the walk-in service and support. If they lose that, they lose customers.
3. Perceived value. Want to lower sales of an expensive perfume? Lower the price. Why should Apple be saying “hey, we’re as cheap as Compaq” and lose the prestige of the Apple brand?
4. What you get… The iPod outsells every other portable music player made, despite being about the most expensive one. Why? Because it works better. It’s built better. The interfaces, both user and computer, are better thought out. It’s why you can plug your iPod into any number of new cars but can’t do the same with a Zune, Sansa, Archos, etc. (and, no, I’m not talking about an analog cable from the headphone jack — I’m talking full control from the head unit complete with album art, database of music, etc.).
Oh, and before you accuse me of being a “snob” or “prosumer”, I’m an engineer who’s been in the computer field since before IBM introduced their PC. I’ve built more computers than most people have used. I’ve installed and used every OS from CP/M-80 to BeOS to MS-DOS to Window (1.0 on up). I just bought my first Mac less than two months ago and it is so superior to the Windows stuff I’ve put up with recently that I’m a convert.
And I may be springing for a $2K+ Mac Pro — because my time is worth something.
MyRightEye on December 16th, 2008 at 2:24 am
Typing this, in bed, on my Lenovo S10, running, wait for it, Mac OS X 10.5.5.
I have been needing a laptop this tiny for 10 years. Apple is aware of the demand, but won’t make it. There loss. Lenovo just got the profits Apple could have had. Yes, it’s a piece of noisy plastic junk compared to my MacBook Pro, but I don’t care, because it’s so freaking small that I can take it EVERYWHERE in one hand, and with a 6 hour battery. Now i will admit, if Apple made a machine this size for twice the price, I would sell this and buy it, but they don’t, so I can’t.
Wake up Steve, if you won’t give us what we demand, we’ll take your OS to someone else.
Bart Johnson on December 16th, 2008 at 4:36 am
@MyRightEye
Dude, 10.5.5 is so yesterday.
Luis Alejandro Masanti on December 16th, 2008 at 4:40 am
I think it was Wired that yesterday posted an article in “subsidized netbooks”… a.k.a. netbooks+2 years access contract.
This can open a whole new world!
Joeri on December 16th, 2008 at 4:58 am
Macbooks for a lot of users are a worse choice than a netbook. I know because I own both a macbook and an acer one. The macbook is too big, and too expensive. If it gets stolen or damaged on the road, that’s painful to my wallet. The netbook I’m willing to take the hit on. At the same time, while on the road, the macbook doesn’t do anything the netbook can’t that I really need. The macbook is a fine choice for a desktop replacement, which is why I bought it, but it’s just too big, and too powerful/expensive to use as a true mobile machine.
Petey Wheatstraw on December 16th, 2008 at 6:42 am
I have a small form factor HTPC for watching movies. I have a gaming laptop that I pull out when I want to WoW. And soon I will have a small netbook specifically for checking e-mail and Facebook and so forth. I could have paid twice (or in some cases, three or four times) as much for Apple products to do the same things but I don’t see the point. Speculating as to why Apple should get into the market by offering affordable options is just so much wankery.
Fun to watch? on December 16th, 2008 at 7:02 am
Data showing that your theory is wrong: http://online.wsj.com/article/SB122938758242108907.html?mod=testMod. Apple is not immune
Mac sales dropped 1% last month vs a growth of 2% for PCs….even with a new line of MacBooks out. The same rules don’t apply to Apple? Please. I know many of you are swimming in Apple’s Koolaid, but realize that they can’t defy gravity. They’ve grown their business model and acquired a larger market share for one simply reason: not because Apple is great, but because everyone else got lazy. Apple took advantage of a lack of innovation for a period of time, but now the sleeping giants have realized that they’ve got to pump out products that consumers want – and they’re doing it.
Apple is on the same playing field as Dell, HP, etc, whether you want to admit it or not. Luckily for Apple, they know the market they’re playing in. During the last earnings call they cited about a 3-5% reduction in gross margins and even offered lowered guidance for fiscal year 2009. Why do you think their stock has been getting hammered? It’s down 52% since Jan 1, while the Dow is “only” down 35%. Apple is under-performing against the broader market. Why? People know they can’t continue to pull of the same nonsense in the future, at least not in notebooks. If Apple wants a higher margin product, they need to stick to the iPhone and iPod.
Also, the author makes a silly argument about how the makers of netbooks are operating on reduced profit margins and that this equals an unsustainable business model. Instead of providing proof, he simply goes on what can only be described as a scare tactic and brings up the idea that people working at such companies should be worried about getting “kicked to the curb.” I don’t even know how to respond to that nonsense. Please use concrete examples instead of making vague references to business models you clearly know little about.
Mark on December 16th, 2008 at 7:26 am
One thing I am not seeing here is the point that where the netbook cuts profit margins on hardware, it opens up new opportunities for software as a service. As a mobile user, I have a bigger PC that I don’t like to tote around with me. A netbook, with subscriptions to sites like salesforce.com, etc. is a great solution.
tom on December 16th, 2008 at 7:31 am
“Finally, for those of you that don’t care if the company makes any money, it’s more money for you, etc. Well, I don’t know where you work for a living, but I hope you have higher expectations of your employer. If they’re barely getting by with a “we lose money on every one but we’ll make it up in volume” strategy, don’t be surprised if you’re bounced to the curb.”
I think choosing a company and rooting for it like a sports team is so silly. Obviously I hope that the company that I work for does well and I do my best everyday to make that happen. In a more general sense, I also hope that all companies do well, not just for the sake of the board members or stock holders, but also for the well-being of the rank-and-file employees.
To quibble over profit margins and business models is completely retarded unless you have stake in the company. As a consumer you want to get the best deal you can, and in the netbook market it’s not Dell or Acer or MSI that is winning, it’s the consumer.
Fred on December 16th, 2008 at 8:56 am
It’s kind of funny when people cite an article as “proof” of something without reading it:
“Piper Jaffray’s Mr. Munster said he expects the company to recover in coming months, and said he is maintaining his prediction that Apple next year will increase shipments by 10%, while the rest of the industry falls 5%.
Shaw Wu, an analyst at Kaufman Brothers, expects Apple to sell 2.7 million computers in the current quarter ending in late December, a 17% increase from a year ago. He expects industry-wide PC shipments this quarter to be about 85 million.
Despite short-term weakness, analysts expect Apple’s products to remain more profitable than many rivals’ computers. The MacBooks are forecast to deliver close to 20% profit margins, compared with 6% or less for competitors, said Toni Sacconaghi, an analyst at Sanford Bernstein & Co.”
See that “short-term” phrase? See the comment about margins? See the analysts’ predictions of an uptick in sales next year for Apple, exceeding industry averages?
Sales of all luxury items drop during more than non-luxury during recessions, but it doesn’t mean that the “smart” thing for Bentley, Rolls Royce, and Mercedes to do is to introduce cars that compete with Hyundai and Kia — which is what the other poster is recommending. Stock in companies that sell luxury items tends to amplify the economy, with economic booms and busts playing more heavily on the stock.
If Apple were “on the same playing field as Dell, HP, etc.,” then they would long ago have folded. They have unique, luxury products. Show me any HP or Dell notebook that, physically, compares to the paper-thin MacBook Air. I’d pay a premium just for the ability to run OS X (without hacking something together with unsupported patches to run it on non-Apple hardware). So would most other Mac users.
Steve K. on December 16th, 2008 at 9:05 am
You will never see a $599 “netbook” from Apple. They have the MacBook AIR for $1800 and it’s selling. They are NOT going to shrink the screen so they can charge less money.
Fun to watch? on December 16th, 2008 at 9:06 am
@ Fred.
Do you realize what you’re doing? You’re comparing current facts (i.e. Apple sales dropped while PC sales gained, attributable to the slowing economy) to future predictions (Apple will recover, according to analysts…who are usually WRONG) I will ignore the rest of your post because it’s based on a false comparison. I will hint at how you’re completely missing the point. Apple Blog’s article tries to hit 3 themes:
1. netbooks are not viable products for apple
2. operating on thin margins is not sustainable
3. market rules don’t apply to apple: i.e. they’re not susceptible to changing demand under economic stress because their products have a low price elasticity
A single WSJ article strongly debunks 2 of those claims and loosely targets the third.
Fred on December 16th, 2008 at 9:22 am
@Fun to watch?:
Interesting how “analysts are usually wrong” — except when they make statements that support your claims. Then you point to their writings as gospel,
You ignored the rest of my post because you didn’t have a good response — and probably because you (correctly) realized that you were seriously outgunned intellectually.
I’ll try to take smaller steps so that you can follow along:
I was not “comparing current facts… to future predictions.” I was saying that most firms selling premium, luxury items suffer worse in recessions, but that analysts predict that Apple’s product line and pricing is such that sales will more than recover as the economy improves.
Again, sales at Mercedes, Rolls Royce, BMW, Maybach, etc. have plummeted — as have their respective stocks. Are you saying that the best answer for them would be to try to compete with Ford, Kia, Chevy, and Hyundai?
Forone on December 16th, 2008 at 9:25 am
IT’S THE [HOME] NETWORK, STUPID! Forgetting the sillies who want to play with Linux (you’re right about that) people really like having a weigh-nothing little Nbook to move around the house or yard or throw into a bag or backpack. There is also a novelty and fun-factor the industry hasn’t seen since the first iPhone. My little XP Acer works perfectly well for casual reading, like this blog, email, etc. However, home networking across different OSs is a headache. Apple risks creating headaches for customers on Apple networks who will miss the easy connectivity Windows users are getting. My guess is Apple really wants to sell iPhones and iPods instead of Nbooks as the secondary home network device, and wants to avoid competing with itself in the home network consumer space. But it may be spitting into the wind.
Darren on December 16th, 2008 at 9:51 am
–home networking across different OSs is a headache. Apple risks creating headaches for customers on Apple networks who will miss the easy connectivity Windows users are getting–
Hunh? My windows machines show up in finder just like my macs, and my macs show up in Network Neighborhood just like my PCs. How is that a ‘headache’? In fact, my mac-pc networking is more reliable than PC-PC, and has been that way for years.
Fun to watch? on December 16th, 2008 at 10:08 am
Hey – Fred Flintstone: brush up on your reading comprehension. You’re still missing the point.
And please stop talking about shit that you have no clue about. Respective stocks of Mercedes Rolls Royce, BMW, Maybach stocks have plummeted? Are you an f-ing moron, or do you just not know how to work the Google on the interweb machine? Mercedes and Maybach are owned by DaimlerChyrsler AG and Rolls Royce (car subsidiary) is owned by the larger aerospace and defense conglomerate Rolls Royce PLC – in both cases the stock of the corporation is not at all representative of the individual subsidiaries who comprise a small % of total performance, not to mention that in Daimler’s case, the fate of Chrysler is what’s largely driving the selloff in the equity markets and squeezing credit spreads in the leveraged markets and derivatives space. You’re making a comparison that cannot be made. The only one that stands is BMW – whose stock, by the way, has dropped only -19%, compared to -34% for the broader market. BMW IS OVER-PERFORMING THE BROADER MARKET.
Generally, luxury brands tend to be somewhat recession-proof. I don’t know why you keep arguing the opposite, but perhaps it’s because you’re completely clueless. The fact that Apple is unable to sustain sales and margins during a recession indicates that it’s not a luxury brand, so stop trying to make that connection. Also, please stop embarrassing yourself by talking nonsense about shit you clearly know nothing about.
Actually, wait…continue. It’s amusing.
dan on December 16th, 2008 at 11:12 am
… let’s not forget the tablet PC market, which Apple has also ignored. Or has ignored since they cancelled the Newton, depending on how you choose to look at it.
Again, depending on how you look at it, Apple has also been ignoring the “netbook” or “subnotebook” market since they cancelled the Duo.
Seems to me that many of the pundits bellowing APPLE CANNOT IGNORE $_________! are guilty of ignoring Apple themselves.
CapNHerb on December 16th, 2008 at 11:36 am
I got my Asus eePC for $350 a year ago. I just use it when I don’t want to bring my $3000 MacBook Pro around (includes upgrades, software, warranty- actually $4200 including the screen replacement). Plus it weighs less than 1 textbook, I don’t care about it breaking, and it starts more than twice as fast as other Windows computers. Plus I see something, I hand it to my friend, not so easy with a laptop. So thats why I would still take it over a regular Mac, nice to have something a little different with the simple Linux. I could unlock it or add Windows but I don’t need to. Also great if your laptop breaks or starts screwing up right before a projects due or whatever. Now if I could get it to work with Time Capsule…
Fred on December 16th, 2008 at 12:14 pm
@Fun to watch?:
“Hey – Fred Flintstone”
Are you 12 years old? Seriously, the last time someone thought that was a clever, insulting name to call me was about 35 years ago when I was in elementary school.
“Respective stocks of Mercedes Rolls Royce, BMW, Maybach stocks have plummeted?”
Daimler has dropped 53% in the last year. BMW has dropped over 39%.
“Mercedes and Maybach are owned by DaimlerChyrsler AG”
Daimler sold Chrysler back in 2007 and has been Daimler AG since then.
“and Rolls Royce (car subsidiary) is owned by the larger aerospace and defense conglomerate Rolls Royce PLC”
Rolls-Royce has been owned by BMW since 1998. You called me “Fred Flintstone,” but I’ve got to wonder if you’re the one who’s been living in a cave for the last decade.
“The only one that stands is BMW – whose stock, by the way, has dropped only -19%, compared to -34% for the broader market. BMW IS OVER-PERFORMING THE BROADER MARKET.”
Wrong again. It has dropped over 39% in the last 12 months: http://uk.finance.yahoo.com/q?s=bmw.de
“Generally, luxury brands tend to be somewhat recession-proof.”
http://www.bloggingstocks.com/2008/03/07/in-a-recession-luxuries-are-the-first-to-go/
http://juicyprint.typepad.com/a_marketing_blog_for_fast/2008/11/so-you-thought-luxury-brands-were-immune-to-a-recession.html
Have someone explain those articles to you. Have them explain to you why Walmart is doing great (http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/13/recession-s-grim-reaper-can-t-catch-wal-mart.aspx) while upscale retailers are suffering — like Saks Fifth Avenue which, in November, reported “widespread weakness” with a net loss of $42.8 million.
If Apple were not a luxury brand, they would not have been able to sell their products at 1.5x-2x what the equivalent speed/storage mass-market PCs sold for, would they, Mr. Wizard?
If you’re really a kid, accept my apologies for being mean to you. But going on the assumption that you’re an adult, the ignorance and illogical conclusions in your posts is just inexcusable.
Fred on December 16th, 2008 at 12:17 pm
@Fun to Watch?:
Just to clarify, the Rolls-Royce I was referring to was the automobile maker, which was sold by the parent company to BMW a decade ago.
A happy reader on December 16th, 2008 at 12:22 pm
I’m a reader who trickled down here through Digg.com
Fred Flintstone, I went through the thread and realized you threw the first punch @ FTW (Fun to Watch) despite being in the wrong. To insult another user’s intelligence because you have no coherent defense against him is… hypocritical.
But please keep posting Fred Flintsone, you’re providing me some good entertainment.
muppetjones on December 16th, 2008 at 12:37 pm
While I love ‘em, Macs are not in my price range. On the other hand, I refuse to by HP, Lenovo, Dell, etc.
I recently bought an ASUS EEE 1000 for traveling and work — I love the thing. No XP. No (litte?) battery concern. It’s great.
Fred on December 16th, 2008 at 12:41 pm
@A happy reader:
Yep, I threw the first punch, and it was from a strong footing.
I insulted his intelligence because his response to me consisted of making up a straw man argument, attributing it to me, shooting it down, and then using that as an excuse to not address the points I actually did make.
And, seriously “Fred Flintstone”? I’m thinking “sock puppet” — because the chances of meeting two people in the same forum who think that’s a clever insult… Well, the chances of that seem pretty slim.
Fun to watch? on December 16th, 2008 at 1:51 pm
Fred Flintstone -
I was a bit off in some of my details (Daimler Chrysler vs Daimler, Rolls Royce being part of BMW/VW) but my main point about the larger market dynamic still stands – that you’re making nonsensical comparisons and that luxury brands are generally considered recession-proof. You linked to a post that says precisely that: “luxury goods market..thought immune to the ebbs and flows of economic fluctuations…” There’s speculation that the segment will hit a downturn next year, but it’s just that….speculation. And even then, we’re not talking about a recession in luxury brands (the article contradicts itself). The article clearly states that growth will slow to 3% – however slow, growth is still growth. A recession is defined by several consecutive quarters (I think it’s 2, but it might be more) of negative growth.
Several posts ago you wrote: “I was saying that most firms selling premium, luxury items suffer worse in recessions” – you had it exactly backwards. But thank you for posting that link, which agrees precisely to what I’ve been arguing the whole time. The youngins win again.
Bill on December 16th, 2008 at 2:24 pm
I personally have a desktop that I built for gaming, and I wasn’t in the mood to spent a lot of money for something that I could carry around. As such a netbook was perfect for me.
Darrell Etherington on December 16th, 2008 at 2:28 pm
Does anyone have any idea what the actual margins are? They aren’t great on regular-sized notebooks either, and I’d hesitate to see they weren’t worth a company’s time without some actual figures. The whole argument seems based on a supposition that they aren’t making money. If, as is also possible, they are, then one of the strongest points against an Apple notebook is gone.
Fun to watch? on December 16th, 2008 at 2:55 pm
Oh, and here you go: iPhones being sold at WalMart. First, Macs getting sold at a standard electronics retailer (BestBuy), now iPhones selling at a discount retailer…there goes your “luxury brand”. ROFL. I want to the day Maybachs are sold alongside a Toyota Camry.
http://www.bloomberg.com/apps/news?pid=20601103&sid=a4YIU21gLaSY&refer=us
Fred on December 16th, 2008 at 3:55 pm
@Fun to watch?
“I was a bit off in some of my details (Daimler Chrysler vs Daimler, Rolls Royce being part of BMW/VW)”
Talk about an understatement! You were unaware of things that took place a decade ago (sale of Rolls-Royce to VW). You stated that the stocks of said luxury car makers didn’t tank, when, in fact, Daimler (owner of Mercedes and Maybach) dropped 53% last year.
And to top all of that off, you now seem to think that BMW and VW are somehow related to one another. They aren’t. They are fierce competitors, with VW-owned Audi positioned directly opposite BMW.
For someone who likes to spout off about an ability to “work the Google on the interweb machine,” your misconceptions are hilarious.
Through all of your out-of-context quotes and silly blatherings, you continue to look foolish and prove that you know nothing about retail, marketing, brand positioning, or the stock markets. From the article you failed to grasp:
Title: “In a recession, luxuries are the first to go”
First paragraph:
“For anybody who’s been following the downfall of Sharper Image, there seems to be a pretty obvious lesson: when people are worrying about the rising cost of food and are scrimping to fill their gas tanks, high-priced doodads and assorted electronic gewgaws are the first things to go. The next things, of course, are luxury goods.”
It really can’t get much clearer than that. You can cherry-pick lines out of context all you want, but the above is the clear point of the article.
Please explain again how Apple, by following the business model of Dell (whose stock is down 51.9% YTD), would somehow become far more successful.
Face it: Apple is a luxury brand and has been for years, commanding a far greater price and profit margin than rivals. If they try to go head-to-head price-wise with Acer, MSI, Dell, Lenovo, and other commodity/economy brands, they will lose. Apple’s entire organization, from hardware and software engineering to manufacturing to their retail stores is geared towards providing a premium experience for consumers buying a luxury brand with unique attributes.
It would be like Rotel deciding that they had to bring their pricing in line with that of JVC and Kenwood (work the Google on the interweb machine if you don’t know about Rotel).
Simply put, the razor-thin profit margins on Dell, HP, Acer, etc. would not support Apple’s development of its OS X operating system, their spacious retail stores, their local service centers, their customer support, or their product R&D. Take away those things, and the reason to buy the Apple brand goes away, too. Congratulations, you just reinvented Gateway.
Fred on December 16th, 2008 at 4:29 pm
Here we go again…
“Oh, and here you go: iPhones being sold at WalMart.”
Now for the actual truth: Analysts say Apple *may* offer a discontinued 4-gigabyte iPhone through Wal-Mart for $99. Great. Apple may unload their old, discontinued, outdated stuff through Walmart. That’s like being excited that Carmax has a used Mercedes.
“First, Macs getting sold at a standard electronics retailer (BestBuy),”
Dude, Macs have been sold by standard retailers for decades. And an article about the Best Buy connection is so simple, even you should understand it:
“Best Buy is the largest electronics retailer in the US, and as such, has a geographical reach that Apple lacks. Apple Stores have been successful beyond expectations, but are primarily concentrated in larger metropolitan areas. If Apple hopes to increase its desktop and laptop market share like some expect, Best Buy’s extensive geographical reach will help.”
Sure, you keep telling yourself that Apple is not a luxury brand. Then read this:
Title “Why Apple should keep its prices high during the recession”
Author: Don Reisinger, Technology Columnist at CNET
Date: December 8, 2008
Excerpt:
“Apple has the luxury of being, well, a luxury brand. Most consumers don’t look at Apple and put the company on the same level as a Dell or HP. For consumers who want to save money on a computer or don’t want to worry about learning Mac OS X, Apple isn’t a consideration anyway.
…
People who buy Macs aren’t looking to save money; they’re looking to buy a premium brand because of the perceived value of the product. Apple understands that; we understand that; why don’t analysts? Sure, the market is moving towards cheaper alternatives and some people want smaller laptops, but hasn’t anyone noticed that over the past few years, Apple’s market share has grown considerably in the face of “cheaper” computers?
…a premium brand during a booming period is still a premium brand during a recession. Granted, less people are theoretically able to buy premium products during a recession, but we can’t lose sight of the fact that when we compare comparably equipped products, a Mac is, on average, far less expensive than some want to believe. So maybe a person can’t afford that MacBook Pro he or she has wanted, but you know what? That $999 MacBook is still affordable and, hey, it’s better than buying another cheap Dell laptop, right?
Historically, premium brands perform well because they’re just that–premium. There’s no reason for Apple to drop the price of its Macs to satisfy one analyst who worries the company’s prices are too high. Mac sales are up, Apple’s margins are healthy, and people covet Macs more than any other computer on the market. Consumers are drawn to Macs because they provide more perceived value than any other product on the market. And it’s that perception that has made Apple’s “premium” strategy an unbridled success.
Recession or not, Steve Jobs would be crazy to change anything in that plan.”
————————-
Now go rub some salve on your burns.
Tom Reestman on December 16th, 2008 at 5:03 pm
Darrel,
“The whole argument seems based on a supposition that they aren’t making money.”
Not quite. The term I used is razor-thin margins. The presumption is they may make money, but not very much.
Much like with cheap laptops, in the PC world a vendor can’t afford to give that market up. Not because they want the low margin, but for many the low price is the “bait” and they up-sell stuff to grab a few more $$$. There’s a reason buying Dell or HP online walks you through every known accessory to man. Even if they don’t up-sell you on the purchase, you’re a customer and maybe they’ll up-sell you next time.
Apple is not losing customers to the netbook market. Just today, NPD’s November figures show PC laptop sales up 15% YOY, while Apple’s laptops sales are up 22% YOY. Without cheap netbooks, PCs probably wouldn’t have even reached 15%, yet Apple is still soundly beating them.
Jon on December 17th, 2008 at 12:55 am
I have a MacBook Pro and recently bought an Aspire One. The MBP now stays on my desk, I haven’t unhooked it from the power supply in weeks. I love the Aspire One, it goes from the coffee table to the kitchen to bed. Everywhere but my desk.
Cheap or not, netbooks have appeal.
Fred on December 17th, 2008 at 1:08 am
@Jon:
Agreed. Netbooks have a lot of appeal (I expect to buy one in the near future) — especially for those times when you just need to check e-mail, FTP a file to a thumb drive, check a price online, etc.
The question is whether it makes sense for Apple to compete in a netbook price war. I don’t think so. OS X practically defines the Mac experience and none of the netbooks available yet have the horsepower to make it responsive and pleasant to use. So to release a Netbook, Apple would need to make a slimmed-down version of OS X (think Windows CE) that could, hopefully, run out of flash memory (adding horsepower costs battery life and larger batteries add weight). Even then, there’s no guarantee that it would sell well enough that they would recoup their engineering costs.
Apple tried to get into the PDA market and that was a disaster. I’m sure that they are remembering that when looking at the netbook market.
Regards,
Fred
crander on December 17th, 2008 at 9:50 am
Reestman has obviously never used a netbook. I have a MacBook and a Dell Mini 9. My MacBook might as well be a desktop now as it hasn’t moved in a month. The Dell Mini 9 is lighter and much more handy than a MacBook Air and I think I would prefer to have it when traveling around town or country. It is also 1/8th the price. You do the math.
Comparing a Dell Mini 9 notebook with a white MacBook is not comparable Reestman is right. As laptops intended for mobile use the comparison is a 2.28 pound device vs. something twice as heavy and much harder to fit in a bad. The Dell is smaller than many hard back books. If people want performance they aren’t using a white MacBook anyway, that is for sure.
Apple can charge a premium. An apple netbook with the same hardware as PC vendors could cost $599 or $699. It obvious Apple was caught off guard with the popularity of the netbook. One can speculate they are going to attempt to innovate in this new category, show up late and charge the apple tax for it.
Google Translate on December 18th, 2008 at 10:53 pm
All these Netbooks are great but I still feel the price is a bit high for mass adoptability.
For the same price (or for a tiny bit more) you can get a basic laptop that can do a lot more than just browsing in that small little window. Those small screens are not that great for too much browsing. May be Netbook should come with trimmed down versions of the major browsers to avoid wasting the precious screen real-estate.
Also I would go for at least 10 inches or more. Anything less is too small of a screen to view anything decent.
Fred on December 19th, 2008 at 12:07 am
@Google Translate:
I understand what you’re saying, but the iPhone has a screen that is a fraction of the size of a netbook and costs about the same amount — and iPhone sales are not suffering.
I believe that, like the iPhone, these devices are not being bought as primary computers for use many hours a day. They are being purchased as second, third, fourth, etc. systems by people who already have laptops and/or desktops. They are fine for banging out a quick e-mail, configuring a router, making sure a web server you’re responsible is still up, taking a few notes during a presentation, or verifying that the price you’re about to pay for something is really competitive.
At $300, I think that they will be a hit. All we have to do now is see whether a flash-based system running a custom Linux will emerge the sales leader or whether a pricier Windows-based platform will win out. I’m hoping for the former.
Frank Daley on December 27th, 2008 at 4:59 pm
I have an Acer Aspire One netbook that was pre-loaded with Linux, and a standard Acer notebook that was pre-loaded with Windows XP Home, but now runs Fedora Linux exclusively.
I use both my netbook and notebook, but for different purposes. On short trips I take the netbook, that is great because of its light weight and small size, but obviously not as nice to use for extended periods.
I use Dropbox to sync my files from the notebook to the cloud so that I can easily access any files I need from my netbook via the Dropbox web interface when I am out and about.