Has Apple Fully Abandoned The Low End? Here’s Why…

Are Apple products only for the elite, well educated, higher-income computer users? Has Apple abandoned the low end computer market to Dell, Gateway, HP, eMachines, and the custom PC box builders?

Many would say a begrudging yes to the former, and a resounding yes to the latter. In a word, yes. Apple has abandoned the low end product market.

First, let me define low end. Cheap. Low price. Low to middle value. Not high value. Not quality. Not functionality. I’ll argue as forcefully as anyone that Apple products are strong on quality (Macs and iPods) and strong on value. Apple only provides lip service to the low end, despite the $799 eMac and the $999 iBook.

The low end market has been abandoned.

Second, other terms have to be considered within the appropriate context. Value. Market share. Profit.

Mac users of many years know there’s strong value in Apple products; eMacs, iBooks certainly. Quality usually costs more but should provide for a wider variety of value propositions. Including the iLife suite of applications (iTunes, iMovie, iPhoto, iDVD, and Garageband) increases the value proposition of owning a Mac far beyond even the throwaway items found in the typical Windows PC.

Market share means different things to different people. Greater market share does not necessarily equate to greater profits, although success in the former should lead to success in the latter.

Apple competes for sales in many markets, and, conversely, does NOT compete in many other markets, so comparing Mac market share with PC market share will not yield an accurate picture.

For example, most reports indicate that Apple, on a worldwide or US basis (take your pick) has about 2-percent to 3-percent share of the overall personal computer market. That may be accurate, but the overall market also includes millions of PC’s which act as terminals, cash registers, print servers, typewriters, and so on-- all areas where Apple just doesn’t compete.

However, in other areas such as graphics, education, audio recording, video editing, Apple either has a substantial percentage of the market, or is the market leader, despite availability of substantially less expensive Windows PC’s.

But not the low end.

Profits. It’s what keeps a company going. Without a steady stream of earnings, any company will be challenged to keep up. Stock market guru Peter Lynch says it’s the “E” in profits to earnings ratio that’s important when determining a company’s value.

Since Apple CEO Steve Jobs came back to the company in 1997, Apple has had a steady stream of earnings (profits), and, by all considerations, the stock price (with plenty of ups, a few downs, and up again) has benefited the Apple faithful and the patient.

“Cheapie Windows PC desktops and laptops are often priced one third less than Apple’s lowest Mac.”So, Apple remains profitable, has a strong balance sheet, has launched a steady stream of attractive (and pricey) products, and remains competitive is a select number of markets (competitive market share). From any perspective the company is on a good roll.

Except for that low end.

To be fair, there’s probably a good reason for Apple not wanting to compete at the low end. For one, innovations don’t occur at the low end of the market (in any market). Unless you count as “innovation” figuring out how to make something cheaper instead of better (in which case, Dell is arguably the low end leader). Steve Jobs says Apple is all about innovation.

Mac and iPod customers would agree that Apple innovation is certainly a key point of differentiation.

What keeps Apple out of the low end pool? The company does stick its toe in the pool from time to time, but only to maintain market share in key areas (education, for example, with the eMac and iBook). There’s the $799 eMac and the $999 iBook. That’s low end product, right?

Wrong.

Continue on to Page 2 to see why Apple is out of the low end market for Macs, but why the company owns the whole spectrum for portable music players. Including the low end.

Click Here for Page 2…

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