The G4 Debacle

I hope you were as shocked as I was at Apple's arrogance on Wednesday.

At the same time they announced profits of $111 million, IBM coming on board as a G4 supplier, and a 28.7% gross profit margin, they reduced the speed of the Power Mac G4 without trimming a penny from the price.

In the entire history of computing, slower models have only been introduced as economical alternatives to faster models. Not so with Apple - the G4/350 costs exactly as much as the G4/400 did before the announcement.

I can understand Apple's need to do something. Motorola's production problems with the 500 MHz G4 are nightmarish, so postponing the G4/500 to January absolutely makes sense. It's a refreshingly honest move with no need to spin doctor things.

Since demand is outstripping supply, Apple's decision to use the 350 MHz G4 chip was also brilliant. It's less costly than the 400 MHz chip - and nobody else seems to be using them. It could have been the basis of an even more affordable Power Mac G4.

But then the reality distortion field kicked in. Apple did something completely unexpected: it dropped speed of each G4 by 50 MHz with no drop in price. None.

The MPC7400 PowerPC microprocessor with AltiVec technology is available in 350, 400 and 450 MHz versions, with 500 MHz versions available soon, priced at $210, $275, $355, and $475 respectively in quantities of 1,000. (Yahoo/Business Wire, 8/31/99)

The 350 MHz G4 costs Apple less than the 400 MHz one - about $65 less. It's also about 12.5% slower than the 400 MHz one.

Apple should have reduced the price.

They argue that RAM prices are up, which is true. They're maybe twice what they were last spring. In fact, this is a good time not to buy memory, whether you're Apple Computer or a lone consumer.

Still, a quick visit to ramseeker shows that a 64 MB DIMM for the G4 sells for as little as $115, while 128 MB can be purchased for $223 and 256 MB for $440. (Prices fluctuate daily; they may have changed by the time you visit.)

Let's assume Apple's cost is a bit lower, since they buy thousands or tens-of-thousands at a time. Maybe their cost for 64 MB has risen $40 since they initially set pricing for the Power Mac G4. That would mean about $80 more for 128 MB and $160 more for 256 MB.

Thus, Apple's cost to produce a G4/350 with 64 MB of memory is roughly $25 less than it was for the just-discontinued G4/400. Figuring Apple's average gross profit of 28.7%, they should have reduced price by at least $30.

The G4/400 with 128 MB of memory replacing the G4/450 is about a wash, so from a cost standpoint, Apple is probably justified in retaining the same price.

Apple's cost to produce a G4/450 with 256 MB of memory is probably higher than was projected for the G4/500 because of today's memory prices. Keeping the price stable is a good move.

This all makes some assumptions about Apple's costs for CPUs and DIMMs. It doesn't look at the reduced cost for slower L2 caches, which should also argue for price reductions.

In the final analysis, Apple probably could have introduced the G4/350 at $1,499, $100 less than the G4/400. At the very least, it should be $50 less as a symbolic gesture that slower computers should cost less than faster ones.

In the same vein, it's great to see Apple bring the Sawtooth motherboard together with a 400 MHz CPU. It justifies discontinuing the old G4/400, but not the huge difference in price. Apple should have done something to make the G4/400 (Sawtooth) more affordable - maybe a smaller hard drive or 64 MB standard memory.

Considering that a G4/400 (Yikes!) cost $1,599 on Tuesday, paying $2,499 for a G4/400 (Sawtooth) today seems preposterous. Sure, it has more memory, DVD, a larger hard drive, 2X AGP, an AirPort socket, and a better motherboard, but why not a 64 MB, CD-ROM, 10 GB hard drive Sawtooth with AGP and AirPort? At the very least, Apple could have shaves a few hundred dollars from the price with a less expensive configuration.

Apple should bite the bullet to the tune of at least $100 on all of these - and maybe offer some real alternative. (What, think different?) Here's what I'd offer:

• G4/350, 64 MB, CD-ROM, 10 GB hard drive, $1,499
• G4/400 (Yikes!), 64 MB, CD-ROM, 13 GB hard drive, $1,699
• G4/400 (Sawtooth), 64 MB RAM, CD-ROM, 13 GB hard drive, $2,099
• G4/400 (Sawtooth), 128 MB RAM, DVD, 20 GB hard drive, $2,399
• G4/450, 128 MB RAM, DVD, 20 GB hard drive, $2,699
• G4/450, 256 MB RAM, DVD-RAM, 27 GB hard drive, $3,299

Yeah, it's not quite as simple as the current product line, but it gives customers the option of ordering systems more like the ones that were cancelled without taking a major hit on price. It would certainly make Apple look a lot more in touch with the real world than they do after dropping speeds without dropping prices.

No matter how they spin it, no matter how powerful the Steve Jobs Reality Distortion Field, it comes down to dollars and cents - something the consumer understands immediately no matter how you word things.

As of Wednesday evening, we're all offered less powerful computers for the same price that more powerful ones had on Tuesday.

My advice: if you want a Power Mac G4, scour the web and call all your local dealers looking for old inventory. It's the only way you'll get the power you wanted at last week's prices. Once those are gone, hold off until Apple reduces prices unless you absolutely must buy a new computer.

Further Reading

• Power Mac G4/400 (old), limited stock, $1,594 shipped, Outpost.com.
• Apple reverses G4 cancelation policy, MacNN, 10/14. "Discounts will reportedly apply to orders of 500 MHz Power Macs, which will be shipped with 450 MHz processors instead."
• Stevie in Vaporland, MacCPU, Bob Moriarty, 10/14. "Apple took 86,000 orders for G4 machines they could not deliver because they weren't scheduled to get the chips yet from Motorola."
• Power Mac G4/350 (Yikes!), Power Mac G4/400, 450 (Sawtooth) profiles updated, Low End Mac, 10/14
• Apple goes crazy, Sho, MOSR.net, 10/14. "What a brilliant, creative and yet unpredictable and arrogant company Apple is."
• Apple announces G4 speed reduction, prices stay the same, Mac Observer, 10/13. "This is an unbelievably bad move for Apple...."
• G4 line revved - downward, MacWeek, 10/13. Apple drops CPU speed, but not prices.
• Apple intros 350 MHz G4, postpones 500 MHz, Apple Computer, 10/13. With high demand for the Power Mac G4 and no 500 MHz chips in sight, Apple has introduced a 350 MHz version of its personal supercomputer.