Mac Musings

Lament for a Budget iMac

Daniel Knight - 2002.01.08 -

On January 7, 2002, Steve Jobs effectively wrote off the new Mac user on a budget.

Don't get me wrong; the new iMac has the features to justify the new prices, but it also sells for US$500 more than the old entry level iMac. Nice as flat panel displays and G4s are, they're not something everyone needs or can afford.

As a computer user who has rarely spent $1,000 for a computer, it disturbs me that Apple's least expensive model - once the old iMac inventory is gone - is the $1,199 iceBook. Not that it isn't a nice model or isn't pretty darned incredible that Apple's least expensive model is a portable, or even that a 500 MHz G3 isn't plenty of power for most users, but that's still $400 more than the old 500 MHz CD-ROM iMac.

Once the computer for the rest of us, killing off the successful, affordable sub-$1,000 iMac won't help Apple increase market share. And it may cost Apple dearly in the education arena, where not every school lab wants iBooks or flat panel iMacs - or has the budget to afford them. Just like home users.

Steve Jobs has turned what was originally intended to be an information appliance for the masses back into a cool toy for the well heeled - the same market Apple failed to successfully sell the Cube to.

No, I'm not predicting doom for the FP iMac. Just the opposite; it's going to be such a runaway success that Jobs, Apple employees, and AAPL shareholders may forget that sub-$1,000 iMacs ever existed. (For the record, the 700 MHz iMac has already been removed from Apple's online store.)

It's often debated which car company Apple is most like. Is Apple the BMW or Honda or VW of the computing world? I'm leaning toward Honda, which entered the American market with cheap, high MPG cars, built a reputation for value, is a leader in alternatives to gasoline, and tends to cost a bit more initially than cars from American auto makers.

Like Apple, Honda would probably shudder at the elitist label, claiming to make "cars for the rest of us." And from their perspective, it's true. Better cars and better computers are worth a higher initial investment if that results in reduced costs over time - but it doesn't make it any easier to buy them up front.

I'm pleased to see Apple leading the way with space-efficient, energy-efficient, insanely great computers, but a big part of the "other 95%" they want to convert is attracted to $799 Dell systems. Seeing sub-$1,000 prices for Windows PCs all over the place, these consumers won't give a $1,299 iMac a second thought - "too expensive."

Far better for Apple to keep the classic iMac in production for schools, businesses, families, and individual users who don't want to budget over $1,000 for a new computer. Even if the classic iMac represents only 5% of Apple's sales, by embracing the budget buyer Apple can fight the stigma of being an overpriced elitist computer company.

UPDATE: From MacCentral today - "Starting today we've kept the $799 price point of the existing iMac and we've taken the $1,299 CRT iMac and dropped that down to $999." - Phil Schiller, Apple's Vice President of Marketing.