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Mac mini Margins, Not So Mini

As part of a general refresh of all desktop products, Apple today announced a long-overdue update of the Mac mini line. The mini gets a badly needed upgrade of its processor to a 2.0 GHz Intel Core 2 Duo and the Intel integrated graphics adapter is replaced by a much superior NVIDIA GeForce 9400M. (This, by the way, means that Apple now uses NVIDIA graphics across the board.)

The mini is the cheapest product in the Mac line and the conventional wisdom holds that bottom-of-the-line products don?? yield profits. That is probably not the case for the mini. First, the base price of the mini with 1 GB of memory and a 120 GB hard drive is $599. That?? high enough to provide a reasonable amount of profit even on an entry-level product. Apple wants to build margin share, but has no intention of doing so by offering $300 door busters.

Even more interesting is the $799 upsell model. The extra $200 buys you an extra gigabyte of memory and an extra 200 GB of hard disk storage. Now the retail price of adding a gig of memory is less than $30, while the extra cost of those 200 GB of storage--again, for quantity-one retail--is about $40. Apple, of course, doesn't pay retail and my guess is the bill of materials for these two upgrades is between $25 and $50. A $200 boost in the selling price of the mini provides the sort of margin that other computer makers can only dream about.

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