Apple 2.0

Covering the business that Steve Jobs built

The $800 rumor that spoiled Apple's party

October 14, 2008: 3:01 PM ET

Blame Duncan Riley.

Last Wednesday, he posted an "exclusive"  on his blog -- The Inquisitr -- under the headline: "Apple to launch $800 laptop." Although his scoop was unsourced, the news that Apple was set to announce its cheapest notebook computer ever was picked up by Apple blogs and mainstream publications around the world -- including the New York Times. Bernstein Research analyst Toni Sacconaghi even published a spreadsheet calculating how much an $800 laptop would increase Apple's available market.

So when Steve Jobs unveiled Apple's new line of laptops on Tuesday with starting prices of $1,299 for the MacBook, $1,799 for the MacBook Air and $1,999 for the MacBook Pro, you could almost hear the sound of Apple's (AAPL) shares falling.

What this means is that Apple is not -- with one exception -- lowering prices in order to grow its market share. In fact, it raised the base price of the MacBook $200. Steve Jobs is clearly sticking with the strategy that has worked for the company since he came back to Apple in 1997: building high-end, high-margin computers and selling them at a premium to discriminating users.

The one exception is the original white MacBook -- the best-selling MacBook ever, according to Jobs -- which sold for $1,099 when it was introduced two years ago and will now sell for $999.

What you don't get with the white MacBook, however, are the new features introduced on the redesigned MacBook and MacBook Pro:

  • Unibody aluminum frames (aka "the Brick")
  • LED-backlit glossy displays
  • New graphics chipsets offering a 3X-to-6X performance boost
  • Button-less multi-touch glass trackpads
  • Longer (5 hour) battery life

Except for the pricing, almost none of this was a surprise, given that the specs had been largely nosed out by rumor websites days -- if not weeks -- in advance. Even the pricing -- and the fact that the $800 rumor was wrong -- had been leaked a few hours before the event, perhaps to lower expectations on the Street.

If so, it was in vain. Apple's share price, which had gained a record-breaking 13% on Monday and opened higher Tuesday morning, was down more than 5% by the time Jobs finished his presentation and gone to the Q&A. (In fairness, so were most of the other tech stocks.)

"Apple is very good at pricing," says Stephen Baker, vice president of industry analysis for The NPD Group, who believes Apple was right to hold the prices of the new MacBooks steady. "They haven't run out of headroom yet. I expect they will eventually find a way to build out a line that will come in at $799, but they'll do it in their own way and at their own pace."

Piper Jaffray's Gene Munster points out that it's unlike Apple to continue sales of an older model at a reduced price, but considers the move "prudent" given investor sentiment about companies that target high-end consumers, as Apple does.

"We believe the company is positioning its Mac lineup for an extended macroeconomic slowdown," Munster wrote in a report to clients issued after the Apple event. He added, however, that having seen the machines first hand, he thinks the improvements are significant enough to drive buyers up to the $1,299 price-point. "Of the MacBook buyers who would have considered the $1,099 version, we believe more than half will opt for the more expensive $1,299 version instead of the $999 option."

See here for my colleague Jon Fortt's live blog of the event.

UPDATE: Apple has made Tuesday's presentation available as a QuickTime movie. Click here to watch it.

[Photo courtesy of Engadget.]

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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