Path: utzoo!utgpu!news-server.csri.toronto.edu!rutgers!usc!zaphod.mps.ohio-state.edu!mips!prls!philabs!linus!linus!mbunix!kf From: kf@mbunix.mitre.org (Fong) Newsgroups: comp.sys.mac.misc Subject: Re: Low cost Mac's ? Message-ID: <117960@linus.mitre.org> Date: 23 Aug 90 17:15:15 GMT References: <1990Aug22.175608.14166@midway.uchicago.edu> Sender: usenet@linus.mitre.org Distribution: comp Organization: The MITRE Corp., Bedford, MA Lines: 106 To: comp.sys.mac.misc Subject: Re: Low cost Mac's ? Newsgroups: comp.sys.mac.misc Organization: The MITRE Corp., Bedford, MA Cc: Bcc: This "discussion" about the low-cost Mac vs. clones depends on who you (and Apple) believes to be the buying market. If you're talking about corporate and education purchasing, it is best to compare Apple pricing to IBM and Compaq pricing. Corporations, schools and universities buy IBM, Compaq, and Apple although they are beginning to also centralize on a single clone as well (like Dell or NEC). If you're talking about first-time, home, or small business buyers, it is best to compare Apple pricing to clone pricing. I've had many of my no-educational-discount friends buy a clone because they just couldn't spend, or more precisely, justify the spending of an extra $500 to $1000 dollars. (However, almost all who qualified for an educational discount or who use Macs at the workplace bought Macs for home.) Why does Apple price so high? Because the market that they sell to allows them to. Corporate, school and university sales account for over 85% of computer purchases (I think I read this in PCWeek.) Institutions buy IBM, Compaq, and Apple because of long-term "support" (major vendors allow MIS departments to set up in-house centralized purchasing, support, service, and training, with the security of knowing the company will be around for the next decade). For now, these are the largest known markets. So what's the practical problem? At the Mac II-and-up level, there is no price problem in selling Macs to institutions because when all the pieces are put together, Macs are cheaper than 386-level machines from IBM/Compaq. The problem is that in the last two years, 88/86/286-based systems made up over 65% of PC purchases (from PCWeek and ComputerWorld). (IBM/Compaqs account for over 85% of these PCs purchased by corporations). The Mac SE just can't compete in price with these low-end systems - partly because the 9" screen creates a need to spend more money to get another monitor/board to make it really usable in an office environment. And Apple also does not have an alternative for the 386sx machines, which had a 9% market share this past year and expected to be much greater in years to come. How does Apple solve the problem? To make up for this shortcoming, we now have the low-end Macs (Classic, LC, and IIsi). I believe that while everyone thinks these Macs are for the general public (the rest of us), Apple thinks about gaining market share by selling them to these same large institutions, and plans to price them competitively but relative to IBM/Compaqs. Given recent statements that prices won't be lowered, but that there will be better performance at a given price, I wouldn't be surprised (but will be disappointed) if the 2MB Mac Classic lists for $1799, the 2MB Mac LC lists for $2599 (monitor extra), and the 2MB Mac IIsi lists for $4369 (kb, monitor extra); add $500 for 40MB HD. Of course, for the buyer who is looking at clones, these prices are high, even with 30% street discount. But in the corporation/school/university markets, these Macs have enough performance at "competitive" prices. Where does that leave the rest of us? My belief is that the Macintosh interface and system integration, and the Apple name (developed via quality, reliability, and long-term support) are worth something extra in cost (in the same way that I'd buy a Honda instead of a Yugo). But until you have used the Mac regularly (and also know what it is like to use a PC) or unless you have a particular application in mind and seen it in use on the Mac, you won't be convinced that its worth something extra. This is especially, especially true for the first-time buyer (home or small business) who is cost-conscious and looking in the $500-$1000 range. I don't think there is any hope for a Mac in this range in the near future. If the buyer can be convinced to pay something extra (in the same way, people pay about $150 extra for a Sony TV), then there is hope for the Mac Classic. Since Apple may find that this model not very attractive to corporations, it may be willing to price it relative to the IBM PS/1 or a mid-range clone. If Apple prices the 2MB Classic w/40MB HD to sell at $1299 (list $1999), I think it would be competitive. In other words, my friends who bought 286 clones would buy a Mac SE 2/40 for $1300 but not at the previous price of $2100. I don't think Apple will price the Mac LC or IIsi relative to clones. At the rumored price levels, the LC, also called the K-12 school replacement for the Apple II, with a 40MB HD, monitor and a 55% school discount, would cost about $2000, which is about the upper limit for schools. The IIsi has been called the replacement for the IIcx, which has been the most popular business Mac. The IIsi will provide a Mac for businesses who don't need the power or the expansion slots of the IIci. So, Apple, just like IBM and Compaq, will not have the lowest price. They will continue to aim at the "institution" markets, where they will compete on "innovation", "system software and hardware quality and integration", "long-term support", and "image/reputation". Unless a buyer is willing to pay the premium for these seemingly intangible/luxury items, he/she will always buy elsewhere. And so, it doesn't matter what the lowest price clone is. No matter how you feel, rightly or wrongly, that's not the person Apple is selling to. Just my $.02 opinion, Kevin Kevin Fong, MITRE Corporation Standard disclaimer should follow here.