Preemptive Strike? Apple Upgrades Mac Computers

Days before archrival Microsoft is set to release the next major version of its flagship computer operating system Windows, Apple unveiled a significant upgrade to its consumer personal computer lines, including a redesigned entry-level laptop and a desktop machine sporting a huge display. The product announcement comes a day after Apple's (AAPL) earnings report.

Chief among the new releases Oct. 20 is the MacBook, Apple's $999 entry-level laptop usually aimed at students and first-time Mac buyers. The new machine still sports a polycarbonate shell but now it's cut from a single piece of material and has rounded edges. And like the higher-end MacBook Pro, the new MacBook also boasts a long-life battery that lasts seven hours and a light-emitting-diode (LED) display.

Apple also updated its consumer desktop lines, including the iMac and the Mac Mini, and added an entry-level server built into a body similar to that of the Mac Mini. The server, for running computer networks and corporate Web sites, is aimed at small businesses and certain high-end consumers.

Apple also fundamentally redesigned the desktop mouse, dubbed Magic Mouse, which will ship with the new iMac, making it similar in many respects to the multitouch glass touch panels found on its laptops.

New Products vs. Microsoft's Windows 7 Microsoft's (MSFT) release of an upgraded operating system presents an opportunity for Apple to try to attract users who may be willing to switch to a Mac. Apple is expected to target would-be converts with advertising in the coming weeks that plays up the Mac's security and better suitability for its popular iPods and iPhones. At the same time, Apple Vice-President Phil Schiller dismissed any suggestion that the new products were timed to attract attention away from the launch of Windows 7, set for Oct. 22. "We plan our releases based on our own product cycles," he says in an interview. "We really did not give any thought whatsoever to their schedule."

Timing aside, Apple does want to make the case that its products represent good value, an apparent response to Microsoft efforts to portray the Mac as too expensive. "If Microsoft wants to stand for cheap, that's fine," Schiller says. "We'll stand for quality and support and reliability. Cheap is not everything." He also promised a new round of TV ads and in-store marketing efforts to support the new machines. Microsoft's "laptop hunter" TV ads, which portray consumers shopping for a computer but spurning Macs as too pricey, have stung Apple. And while Apple did trim its prices on most of its systems over the summer, it has left its price structure in place for this round of upgrades.

Absent from the Apple announcements is a netbook or mini-notebook PC, the popular stripped-down, low-priced laptop so many PC makers such as Dell (DELL), Hewlett-Packard (HPQ), and Acer have embraced to boost sales volume. "Apple continues to ignore the advice from analysts and pundits who say it needs to be riding the price curve downward," says analyst Michael Gartenberg, vice-president at Interpret, a New York-based consultancy. "This release just screams to the world that Apple is going to keep its own counsel. It continues to resist the race to the bottom."

Benefiting from MacBook Prices In its latest quarterly results, Apple said it sold nearly 2.3 million laptops at an average selling price of $1,265. That's more than twice the average selling price of laptops—$624—during the back-to-school period ended Sept. 12, according to market research firm NPD. Netbooks accounted for 14% of the $7.6 billion spent on laptop PCs during the period, according to NPD estimates. And while netbooks are popular, PC makers are sacrificing profits in favor of volume, Gartenberg says. "The lesson of netbooks is that they sell well, but they're a great product on which to not make money."

Indeed, the entry-level MacBook, Schiller said, has proved to be Apple's most popular Mac ever, having sold 10 million units since the company switched to using chips by Intel (INTC). The new design boasts rounded edges and a polycarbonate body that is cut from a single element of the material. The construction is similar to that of the MacBook Pro, which is made from a single piece of machined aluminum. The new MacBook also has an Intel Core 2 Duo processor running at 2.66 GHz and a GeForce 9400M graphics card from Nvidia (NVDA). It will be available today for a starting price of $999.

The iMac, the popular consumer desktop line that Apple first launched in 1998, saw a significant upgrade, too. Two versions of the machine are making their debut today, one with a display size of 21.5 in. priced at $1,199 to $1,499, and one with a 27-in. display priced at $1,699 to $1,999. The $1,999 version will not ship until November, Schiller said.

The 21.5-in. model is a classic consumer design, sporting chips from Intel running at 3.06 GHz and 3.33 GHz. The entire iMac line will ship with the Mac Mouse that replicates the multitouch surface found on Apple laptops and supports the same two-finger gesture movements for scrolling up and down and moving back and forth between Web pages. Both iMac models will also have slots for SD cards, typically used in digital cameras.

Mac Mini Gets Upgrade, New Model Schiller said the iMac has started to have some crossover appeal with professionals who might otherwise have bought a Mac Pro, Apple's high-end tower machine. The higher-priced version of the machine has a powerful quad-core Intel chip, the Core i5, that boasts four processing brains, as opposed to the typical two-core chip found throughout the rest of the Mac line and indeed on most other PCs. It also has some more options for graphics, allowing the customer to choose between an Nvidia graphics card or one from AMD (AMD) graphics-chip unit ATI. The iMac also supports the installation of up to 16 GB of memory and hard-drive capacity of up to two terabytes.

Additionally, the Mac Mini, a low-priced desktop machine often rumored to be due for retirement, but much loved by tech enthusiasts for its size and versatility, saw an upgrade as well as the addition of a new model. The new entry-level Mini still sells for $599 and sports a new 2.26 GHz Intel Core 2 Duo chip, an Nvidia GeForce 9400M graphics card, and a 160 GB hard drive. A second model priced at $799 boosts the performance on the Intel chip to 2.53 GHz and the hard-drive space to 320 GB.

But it turns out that many Mac Mini owners use their machines as inexpensive servers. They're small enough that owners can string several together in groups to form relatively inexpensive supercomputers; they're also often used by high-end consumers to serve digital media files around the house. Apple's Xserve professional server line starts at $2,999. Apple has launched a Mac Mini server for $999. Schiller says the target is small businesses for which an Xserve would be too expensive, as well as enthusiast consumers looking for a small server to share files around the house. The server has the same dimensions as the traditional Mac Mini and supports storage capacity as high as one terabyte, but lacks a CD/DVD drive. It ships with a server version of Apple's Snow Leopard operating system.

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