Apple 2.0

Covering the business that Steve Jobs built

Would you pay $849 for a new MacBook?

May 3, 2009: 10:17 AM ET

fake-macbook-ad1A report last week that Apple (AAPL) is preparing to slash prices on its entry level MacBook and iMac models has triggered a flurry of speculation about what the new price points might be.

According to AppleInsider's Kasper Jade, Apple sees the cuts -- which could come in the next month or two -- as an "interim solution" to the growing popularity of netbooks, those sub-compact laptops that Steve Jobs once dismissed as "a piece of junk" but which are flying off the shelves at $299 to $349 apiece.

For example Acer, whose Aspire One netbooks are Amazon's bestsellers, saw its U.S. market share grow 49.4% (to 13.6%) in the first quarter of 2009, according to Gartner Research, even as Apple's share shrank to 7.4%, down 1% year to year. Mac sales actually fell last quarter for the first time in nearly six years.

How low will Apple go to turn that around? Jade's reporting -- based on unnamed sources "familiar with the matter" -- is fuzzy on that point, but in the comment stream he makes it clear that he's talking about price reductions in the range of $100 to $150.

Applying these cuts to the current entry-level machines, we get:

  • White 13-inch MacBook: $849 - $899, reduced from $999
  • 20-inch 2.66 GHz aluminum iMac: $969 - $1,019, reduced from $1,119

With gross margins last quarter of 36.4% -- up from 34.7% in Q1 -- Apple can certainly afford to sacrifice some profit to grow share. As AppleInsider points out, Apple last month started selling 2GHz iMacs to the education market for $899.

The real questions is, will it work? Will consumers who are buying $349 Acers -- or like Microsoft's (MSFT) Lauren, $699 HP (HPQ) Pavilions -- give the MacBook a second look if it's priced at $849?

Would you?

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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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