Path: utzoo!utgpu!water!watmath!clyde!att!rutgers!tut.cis.ohio-state.edu!bloom-beacon!bu-cs!dartvax!eleazar.dartmouth.edu!jonathan
From: jonathan@eleazar.dartmouth.edu (Jonathan Altman)
Newsgroups: comp.sys.mac
Subject: Re: Apple Gets Greedier
Summary: Long-Sorry about that
Keywords: Apple, Mac, Prices, long
Message-ID: <10077@dartvax.Dartmouth.EDU>
Date: 14 Sep 88 15:33:32 GMT
References: <1018@lakesys.UUCP> <68072@sun.uucp> <247@rna.UUCP>
Sender: news@dartvax.Dartmouth.EDU
Reply-To: jonathan@eleazar.dartmouth.edu (Jonathan Altman)
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Organization: Dartmouth College, Hanover, NH
Lines: 100

Well, it seems I only post during these "Apple is following a stupid
policy again" wars, so here I go:

In article <247@rna.UUCP> marc@rna.UUCP (Marc Johnson) writes:
>Clearly, this has gone by the wayside.  Just to take one blatant example,
>how is it that 4 or 5 other floppy drive makers can sell top-quality 3.5"
>drives at 60-70% of Apple's price, just to take one blatant example?
>Other posters have noted the strangely non-parallelism of the price increases,
>as well as the increases in non-DRAM items.  This is no simple "pass-along."

This is a supposition I'll throw out:
POINT #1:
MAYBE, just MAYBE, Apple is attempting to distribute the higher costs
of DRAM chips among ALL its products, rather than JUST DRAM-intensive
ones, by NOT just increasing prices on those things with DRAM, hoping
as a result to not make the prices of some things prohibitively high.
Maybe if they didn't do this, the beloved SE would jump much more than
it already is in price.  Is Apple being nice in doing this?  No.  By
holding the price (and therefore the margin) down on CPU models such as
the Plus (no price change), Apple will get the larger installed base
they want.  But, this also benefits those who buy Laserwriters.

Now, non-parallelism also has other effects which maybe Apple wants.
Maybe Apple wants 3.5" drives to be expensive because they don't want
people to use them.  Changing the relative costs of products affects
purchasers' mix of products.  So, look at the price list and check
where price increases are non-parallel.  Maybe Apple is attempting to
persuade or dissuade you from certain bundles of equipment.  Now, the
one thing I notice in this is that the Plus didn't go up in price.
Maybe Apple does want to allow more entry-level and home purchases of
the Plus.  Why?  Again, maybe to increase their installed base.

Marc also noted in his article, which section I unfortunately
deleted, that Apple price increases screw those organizations which
have committed to Apple machines.  (Hope I'm not out of context,
here).  Let me point out that as far as hardware commitments go,
that's true.  It would be more expensive to add to the hardware
base, like a company adding another employee or department to the
group with Macintosh's.  BUT this is only one part of the installed
base.  My office Macintosh is sitting here right now making a
lovely paperweight, because my terminal works just as well for unix
mail.  It's software such as Word, Excel, or Pagemaker, or MPW which
make my Macintosh useful.  The price of that is out of Apple's
control.  Chuq's point about training time, etc. IS also valid here.

POINT #2:
>As Scott noted, there is a big demand now for Apple products.
AND
>All of the hand-waving mumbo-jumbo of another article in this group is
total
>bull.  Raise prices to cut the demand?  Baloney!  Raise prices to RIDE the
>demand!  It's a game of chicken - how high can we raise the prices before
>folks abandon ship?...

YES, YES, YES, Raise prices to cut demand AND get the nifty side effect
that the full profits can be extracted on a machine.  Why?  Very
simple.  Let's say I'm Apple's Sales department, taking orders.
Apple's getting orders each day for 1.5 days' worth of Apple
production.  Now, Sales is only equipped to get 1 day's worth of orders
each day.  So, Sales is overworked because each day I get an extra half
day's work processing the extra .5 day's worth of production orders.
This has two effects: Apple as a company gets overworked and needs some
relief, because increasing the number of employees dealing with taking
orders you already can't fill is ridiculous.  Consider the backorder of
SIMMS already for Mac-II's.  I'd be very happy to know that Apple sales
has put two more staff members on to more promptly process my SIMM
order into an already year long wait list, wouldn't you?  Second point:
Apple may have people working overtime to meet their current demand for
machines, at a rate of pay 1.5 times normal.  Now, these people's time
can't be separated into the time they spend dealing with DRAM
shortages, so the additional labor cost incurred by Apple must by
necessity be passed along to ALL products, going back to point #1.

Now, are Apple's profits going to soar from this price increase?
I'd say yes.  Because Apple will gain more money from each machine
they'd sell, given that they raised prices enough to lower demand
only to the point where (demand >= current output of products).  Did
Apple do this solely to increase their profit margin?  No.  There
are other side benefits, such as skewing demands around between
various products, and straight cost passing.  How much is cost
passing?  I don't know.  But, here's a possibility to conclude with:
Apple has made a reputation as an innovator in the computer industry
with new, novel, and sometimes cheaper products and ways of doing
things.  Maybe Apple will devote some of these (as many people on
the net seem to find) grossly excessive profits and plow some part
of that into R&D for newer, more novel and better products, maybe
even for the rest of us.

DISCLAIMER: I have no connection with Apple other than as an owner and
user of Macintoshes, and certainly have no knowledge of the internal
financial or operational structure and workings of Apple Computer,
Inc.  Also, this article should in no way be construed as a flame of
marc$rna.UUCP (Marc Johnson).  His article was merely the platform for
my message.

Jonathan Altman           jonathan@eleazar.Dartmouth.edu
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