July 1999: One of the baneful things about computers is that they depreciate on a curve whose trajectory resembles that of a falling rock – even worse than cars. I hate depreciation. That’s the reason I have never bought a new car and never will. Unfortunately, while a 10-year-old automobile can still be excellent, no-compromise transportation, a 10-year-old computer is a poor vehicle for anything but the least demanding tasks. It’s the price we pay for a rapidly advancing technology, but I still detest watching the value of anything I buy melt away with every tick of the clock.

For example, two years ago, the PowerBook 3400c/240 was selling for a suck-in-your-breath $5,879.02, and its lower-end sibling, the 3400c/180 went for a still-daunting $3,821.02 (MacMall ad, August ’97 Macworld). Four months later, the exact same machines were selling (MacMall again) for a more modest but still plenty steep $4,499 (-23.5%) and $3,199 (-16.3 %) respectively.

Fast-forward to August 1998, MacMall no longer had PB 3400s in stock, but MacWarehouse was clearing out leftover 3400c/240s for $2,499 or 57.5% less than they had been selling for a year earlier.

Today, 12 months farther along, Compu-America is advertising (August 1999 Macworld) refurbished 3400c/240s and 3400c/180s from for $1,299 and $1,099 respectively. That represents a depreciation factor of 78% for the 240 and 71% for the 180 over two years. You might get $1,000 to $1,100 as a trade-in allowance on a used 3400.

What other high-ticket consumer commodity depreciates 70-80% over two years? None that I can think of even comes close. Now, is it any wonder that people are embracing the cheap PC idea?

High-end PowerBooks have traditionally been especially fast depreciators, partly because their prices have usually been grossly and artificially inflated, to begin with. When I used to sell Mercury outboard motors about 20 years ago, there were 7.5 HP models and 9.8 HP models that looked externally identical, but the 9.8 sold for several hundred dollars more. One afternoon when business was slow, out of curiosity I decided to compare the microfiche parts lists for the two models and see what the difference was. I was only able to find two or three different part numbers – the carburetor high-speed jet and either the intake or exhaust manifold or perhaps both (it’s been a long time, and I didn’t take notes).

Anyway, it was clear that the price difference between the two Mercurys was pure marketing since the cost of manufacture had to be virtually identical.

Apple did much the same thing with the PowerBook 5300. The top-of-the-line 5300ce originally retailed back in 1995 for a whopping $6,499, while the middle-of-the-line 5300c/100 with 8 MB of RAM and a 500 MB listed at $3,699, and the 16 MB of RAM and 750 MB hard disk version went for $4,499. The passive matrix color 5300cs was $2,799, and the grayscale base model $2,199. That’s a $4,300 spread between the base 5300 (which was the fastest one, by the way, thanks to the modest processing demands of its non-color screen) and the top-end 5300ce.

For your $4,300 you got four things different: The main one was a 10.4″ active matrix display, but also a slightly faster 117 MHz (vs. 100 MHz) 603e processor, a larger 1.1 Gig hard drive instead of 500 MB, and 24 MB more RAM. This wasn’t quite the ripoff that it sounds like by today’s standards. The tweaked processor probably didn’t cost Apple that much more, but the active matrix screen and the RAM were expensive back in 1995. Still, the 5300c had the same screen as the 5300ce and still sold for $2,000 less, which seems like an awful lot to pay for 17 MHz of extra processor speed, 350 MB more hard drive space, and 16 MB more RAM.

I will return to this issue of high-end vs. low-end value later in this discussion.

The 3400c was conceived and introduced around the nadir of Apple’s recent troubled period. It was a pretty nice laptop, but the fact that it was essentially a “stretch” version of the 5300 design-wise, using many of the same plastics, made its astronomical introductory price tag pretty hard to swallow. The further fact that the 3400c offered no officially-sanctioned upgrade path (yes, I’m aware that an original G3/3500/Kanga motherboard can be swapped in) added insult to injury.

Early adopters of the 3400c, which was indeed for about six months the fastest laptop in the world, are amply justified in feeling that they got hosed. I say this not in disparagement of the 3400c, which is a very nice piece and which represents a wonderful value at the price it currently sells for refurbished. But a paper loss of $4,580 over 24 months does not represent a good or even acceptable value received for those who bought 3400/240s especially back in the summer of ’97.

Things have improved somewhat with the new Lombard PowerBook G3, which at $2,495 and $3,495 give you a lot more bang for your buck than did the 3400c or even the WallStreet G3 Series ‘Books did when they were introduced in May ’98. However, by this time next year, you can expect the 333 MHz Lombard to be selling in the $1,500 range (-40%) and the 400 MHz machine for about $2,000 (-43%), a less precipitous decline in value percentage-wise than the 3400c experienced in its first year (not to mention the high-end Series I WallStreet – read on), but still a hefty bite to be eaten by early adopters.

The good news is that the cash value of Lombard 400’s projected first-year depreciation will be $1,500, or less than half the cash figure of the 3400c/240’s initial 12-month price swoon ($3,380). In other words, you could almost buy a new Lombard 400 for the amount the 3400c/240 depreciated in its first year.

This makes starting at a lower price point crucial to minimizing the depreciation bite.

Desktop Depreciation

I began this article using PowerBooks as examples because they are my favorite computers, but we should also take a look at the depreciation picture for typical desktop Macs over the same time frame. Consulting again the August 1997 Macworld, it begins to hit home why Steve Jobs insisted on ending clone licensing. Few of the major mail-order resellers were even including Apple desktop machines in their ads two years ago. However, MacNet was offering Power Mac 9600/200s for $3,199, MacMall had Power Mac 8600/200s for $2,939, and Power Mac 7300/200 machines for $2,351.02

A year later, everybody was selling Power Mac G3 desktops and mini-towers, but MacWarehouse still had some 9600/200s for $1,299 (-59.4%). LA Computer Center was advertising refurbished 8600/200s for $1,399 (-52.4%), and refurbished 7300/200s for $1,199 (-49%). The cash drops in value were $1,900, $1,540, and $1,152.02 respectively.

Cut to the August 1999 Macworld, iCN offers 9600/200s for $1,379 – actually more than MacWarehouse had them for a year earlier, and 8600/200s for $1,249 – a $150 or very modest 11% drop over the year; and Compu-America has 7300/200s for $899, down $300 or 25% over 12 months.

So in two years, the 9600/200 lost $1,820, or 57% of its value. The 8600/200 dropped $1,690 or 57.6%, and the 7300/200 declined $1.452.02 or a whopping 61.8% over two years. This is better value-retention than the PowerBooks enjoyed over the same period, and all of the desktop Macs cited as examples here can be upgraded to G3 status quite cheaply. However, in terms of anything other than computers, a rate of depreciation this steep would be considered pathetic.

In the mid-’90s, informed conventional wisdom dictated that you needed to replace your computer every three years in order to stay reasonably current with software advances and performance requirements. Recently, Don Mayer of Small Dog Electronics suggested that the upgrade interval has shrunk to more like two years, and comparing the relative performance of the two-year-old machines we’ve been discussing here with the latest G3-powered offerings, I would be inclined to agree with Don.

A PowerBook 3400c/240 MacBenches at 337 (processor), while a Lombard 400 has a processor score of 1235. The Power Mac 9600/300 scores 664, while a new Blue & White Yosemite 450 racks up a blazing 1,480.

How Much Speed Do You Need?

But do you really need to stay current with the cutting edge of the speed and features race? What do you actually want to do with your computer? Most of us aren’t high-end graphic artists or video-editors. The flip-side of the depreciation equation is that you can buy a computer that was the cutting edge a year or two ago for an awfully attractive price today.

For example, while a PowerBook 3400c/240 wasn’t exactly a stellar deal two years ago at nearly $6,000, it arguably is today refurbished at $1,299. On the other hand, the Power Mac 9600/300 minitower presents more of a conundrum, since the latest Blue & White Yosemite G3 models sell new for about the same price. The attraction of the older 604 PPC Macs is that they offer more RAM and PCI slots than Yosemite, built-in SCSI, and yes, even a floppy drive. If not for these factors, which you may or may not find valuable, the depreciation bug would have bitten the 604-based mini-towers a lot harder. Supply and demand.

As I commented above, I think that consumer disgust with computer depreciation is a big part of what’s driving the cheap PC trend in the Wintel world, and this is a phenomenon Apple will not be able to ignore forever.

The iMac seems to be holding its value quite well, but at $1,199 it could depreciate by 50% over two years and you would still be down only $600. However, $600 is the full purchase price of a cheapo PC with monitor. One of those can depreciate 66% over two years (and it will!), and you’re out only $400. I would rather have an older used Mac with a G3 upgrade for my $600, but for those who insist on buying new, that $500 to $600 cheap PC sings a siren song.

A particularly contentious depreciation-related issue for PowerBook fans is upgradeability. Apple had a great idea with mounting the CPUs of the 500, 1400, and 2400 series PowerBooks on a daughter card that facilitated easy processor upgrades. That ended with the 3400. The G3 Series ‘Books actually do have their CPUs on daughter cards too, but Apple deliberately mounted the system ROMs there too, which essentially prevents third-party upgrade specialists like Newer Technology and Vimage from supplying WallStreet upgrade cards. Apple itself could theoretically offer upgrades but apparently prefers that you buy your faster CPU bundled with a new PowerBook.

This is a shabby way to treat people who are willing to cough up what Apple charges for these machines – even the relatively bargain-priced new Lombards. Early adopters of the high-end WallStreet 292 MHz G3 Series ‘Books were paying $5,599 for the privilege this time last year. Lately, you can buy refurbished WallStreet 300 MHz machines for $2,000. That represents a mind-numbing 64.3% depreciation over one year, even worse than the 3400c/240’s 57.5% freefall in its first 12 months. If there were an upgrade path, I’m sure the early WallStreets would have held their value a lot better.

This is proved out by the prices that upgradeable PowerBook 1400s and 2400s still command – roughly $1,200 and $1,500 respectively, which equals or betters the going prices for the more powerful but non-upgradable 3400s and early low-end WallStreets.

The 292 MHz WallStreet is still an immensely powerful and attractive computer, but people who bought them a year ago shouldn’t be obliged to eat a $3,600+ depreciation hit in just 12 months.

Which brings me back to the point I raised earlier regarding low-end vs. high-end versions of the same model. People who buy high-end machines – the cutting edge of the cutting edge – get hosed a lot worse than those who go for the more modest low-end versions of the same model. For example, in August 1997, the PowerBook 3400c/180 and 3400c/240 were selling for $5,879.02 and $3,821.02 respectively, a difference of $2,058. That two-K and change bought you a slightly faster processor (MacBench 337 vs. 293), and a 3 GB hard drive instead of a 1.3 GB capacity. Otherwise, they were essentially identical machines. Today, two years later, the difference in price refurbished has shrunk to $200.

Perhaps the best way to have a reasonably current machine while cutting your depreciation losses is to buy your computer at the very end of its production run. People who bought WallStreet PowerBooks this past April and May got a lot better value than those who bought identical models last fall. Timing such purchases is usually not all that difficult, as the timing of Apple’s new model introductions is usually quite predictable.

Of course, people who paid $2,800 or so for new WallStreet 300s in early May might have been a bit disgruntled that they could have had a Lombard 333 for $300 less if they had waited one month longer. Perhaps the safest plan is to wait until the new model is introduced before making the final choice.

On the other hand, buying a computer at the end rather than the beginning of its production run usually means that bugs and teething problems that often afflict early-production units will have been ironed out. Those late WallStreet 300 buyers can take some comfort in having avoided the gaggle of annoyances and glitches that seem to be afflicting the early Lombards.

Apple’s Consumer ‘Book

To end this rant on a slightly more positive note, if the new P1 consumer PowerBook to be introduced at Macworld Expo New York later this month can hit the price point of $1,300 that some predict, it will go a considerable way toward positively addressing the PowerBook depreciation issue. Reader Gregory Santilli had this to say on the topic:

I think there is an excellent chance the P1 will increase market share in a couple of major markets.

1. Those of us who have older PowerBooks, that they paid absurd prices to get the features they needed, and
2. The educational market, where a PowerBook is
   1. probably a status item
   2. a functional tool for taking notes
   3. a student-parent group that cannot afford to take $2500-3500 and pay it for a Lombard that turns into $1000 value, outdated and unupgradeable a year or two later.
   4. a low-cost combination desktop and laptop where you can take your data from work or school, and transfer it to the iMac when you get home, for less than the cost of one laptop, you can have two computers, an iMac and a P1.

I currently have a 540c that I am going to use until it is dead. When it dies, I would like to be able to run down and buy a replacement in the $1000-1500 range. After my past depreciation experience, I can’t justify spending $3500-4000 for another ‘Book. Apple has not offered PowerBooks, easily accessible on the market, in the $1000-1500 range unless you wait until right before the new model is released, or wait until the older line is recycled and refurbished for sale. I still couldn’t justify the money while the 540c still works.

If the PowerBooks had upgradeable features, such a large expenditure might be justified. Apple is currently making sure you can’t upgrade your system, and it seems in both hardware and software.

By releasing operating software upgrade versions so often, I have a constant problem with software being compatible. Hence I am still running Mac OS 8.5.1.

Hardware-wise, I know if I skimp on the PowerBook, I will not be able to remedy the error. Hence I have to do a lot of research and make sure the machine does exactly what I want it to do now, and anticipate what I might want it to do later.

I know many buyers of Apple machines, burned once, who are going to be as cautious. If the P1 provides value and features, it may get this group to give up their old machines.

gs

Congratulations to Gregory for sticking with his old 540c for so long. It does prove that you can wring decent value from a PowerBook if you keep it long enough.

© 1999 Charles W. Moore. Originally published at <http://www.geocities.com/Athens/Aegean/9318/depreciation.html>

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