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Apple's Pricey Notebooks: Time For a Change

The birth of a new class of inexpensive thin-and-light notebooks, described in my current Tech & You column, is a good-news, bad-news story for most laptop manufacturers. To the extent that these new sub-$1,000 notebooks cannibalize sales of high-end executive thin-and-lights, among the most profitable products in the portfolio, the manufacturers will face downward pressure on already-battered margins. But to the extent that customers can be persuaded to move up from netbooks, which manufacturers have been able to sell at volume but with little or no profit, these somewhat fancier notebooks could boost the bottom line.

Apple, however, faces a different challenge. The company does not play in the low end of the laptop market. It only offers two models for less than $1,500: A 13-in. aluminum MacBook starting at $1,299 and the $999 white MacBook, a product that is growing tired despite a recent refresh of its processor and graphics. The rest of the line ranges from the $1,799 MacBook Air to the $2,799-and-up 17-in. MacBook Pro.

This lineup helps Apple be by far the most profitable company in the PC business. According to market researcher NPD Group, the average selling price for Apple laptops in February was $1,512 while that for Windows-based laptops, including netbooks, was $560. That comparison is somewhat misleading because NPD tracks retail data and excludes most corporate sales, which are typically higher priced.

But there?? no hiding the fact that the gap is huge and growing.

The problem for Apple is that the company?? position in notebooks seems unsustainable if it wants to maintain or grow its market share and stay a significant player in the mainstream market. Yes, Macs are very well designed and well made, using top-of-the-line components. Yes, I think Mac OS X is superior to Windows Vista, although I think that gap will narrow significantly with the release of Windows 7 this fall. And yes, the suite of applications included with every Mac is exceptional and in some cases the programs are better than anything you can buy for Windows. In recent years, Apple has seemed to want to be the BMW of the computer business, occupying a broad range in the upper part of the market. Right now, however, it is in danger of becoming Bentley.

I think Apple is absolutely correct in its determination to stay out of the netbook market. These little notebooks have their uses, but they lack the horsepower to do a satisfactory job running OS X or the applications that make Macs distinctive. If all a Mac netbook could do is run a browser as well??r as badly??s a Windows or Linux netbook, what?? the point? It?? just a chance for Apple to get into a commoditized, no-margin business, exactly what Apple has always avoided.

The new sub-$1,000 thinbooks pose a far greater challenge. I?? be surprised if Apple came out with a product that, like Hewlett-Packard?? new Pavillion dv2, uses AMD?? Turion Neo platform. Since switching from PowerPCs to Intel processors four years ago, Apple has forged an extraordinarily close relationship with both Intel and graphics specialist Nvidia that it is unlikely to jeopardize with a dalliance with AMD and its graphics subsidiary, ATI. A much stronger possibility would be a MacBook based on Intel?? forthcoming Consumer Ultra-low Voltage processor, probably paired with Nvidia?? GM9400 graphics. The result could be a 12- or 13-in. MacBook, significantly thinner and lighter than current offerings and priced at perhaps $800. That would be a product that could renew Apple?? assault on Windows?market share without compromising the Mac brand.

I have no more clue than anyone else about what Apple is actually doing, and the rumors will grow steadily more intense in the month leading up to Apple’s Worldwide Developers’ Conference, when major product announcements are expected. But I think the logic of the thin, cheaper MacBook is overwhelming, and I’ll be surprised if such a product is not in Apple’s back-to-school lineup.

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