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

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What keeps Apple out of the low end pool? The company does stick its toe in that 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?

Except that cheapie Windows PC desktops and laptops are often priced one third less than that and probably sell 20 to 30 times as many “units” as Apple does Macs. That’s market share.

To get there, price is an object and Apple won’t move strongly to the low end for a variety of reasons.

Market Share Isn’t Important. On an overall basis, true. In select markets, it’s very important. In general, Apple doesn’t worry much about market share. That may create an “island mentality” which could be dangerous in and of itself, but it’s obvious there’s little worry on a general basis about market share.

Profit Is Important. Well, duh. Shareholder value is increased when the stock price goes up. Jobs and Apple and company know that, have shown superb discipline in recent years and have done wonders by squeezing out steady profits, providing for steady earnings, and shareholders have been rewarded with stock value.

Value Is Important. There’s room for multiple definitions here. Value could be cheap, hence “low end.” Value could also be determined as “so damn cool I want one no matter the cost.” For Apple, it’s not cheap. It’s cool.

That requires innovation, a balance of features and costs, and the ability to make products that not only work, but do so better than others in the industry. The sum of the parts is greater than the whole.

For example, look at competitors to the iPod. Some of them are technically superior to the iPod; perhaps cheaper, include FM radio, include recording ability, blah blah… So what?

Not one of them ALSO features iTunes, or iTunes Music Store, or totally seamless computer to player connectivity.

Apple’s iPod hat trick delivers the goods and cool. Users want iPod without even knowing all the reasons.

Are iPods the low end (with 65-percent market share for all portable music players, that’s not a problem, right?) of portable music? There’s always the threat of a competitor with a product that is the same thing, but less money.

If that happens, Apple would be forced to deliver a portable music product that pushes into the territory called “low end.” That may be necessary, but not now, not yet. Here’s why.

While it’s only necessary that Apple maintain lip service to the low end with the eMac and iMac (higher value, higher quality, higher price lead to profit), that may not be a requirement (at least for awhile) with the iPod.

“What product successfully competes with iPod Photo (the high end)? Nothing is close because of iTunes, Mac or PC, iTMS, and the “cool” factor.”Why? The iPod IS the low end. So successfully has Apple’s iPod defined the genre of portable music, that it also defines what is low end and what is high end. Low end? iPod mini and 20 gig iPod. High end? 40 gig and 60 gig iPod Photo.

In short, Apple owns the spectrum. For now.

Jobs and company are smart enough to know they cannot compete at the low end of the computer market and win (market share and profitability). They are smart enough to know they fully define the entire spectrum of portable music players.

What product successfully competes with iPod Photo (the high end)? Nothing is close because of iTunes, Mac or PC, iTMS, and the “cool” factor.

What product successfuly competes with iPod mini and iPod at the low end? Nothing is really close because, 1) iTunes, Mac or PC, iTMS and the “cool” factor, and, 2) with low sales, low product margins, weak distribution (which Apple now owns), competitors can’t make any money or make a dent in the market for portable players.

While Apple has decidedly abandoned the low end market for computers, the company has NOT abandoned value, market share (selective), profits, shareholder value, or the “cool” factor.

For portable players, Apple owns the market. Low end to high end.

What do you think? Is there portable music player competition for Apple at the low end? At the high end? Who? What? What about computers? Can Apple compete at the low end and market a profitable, valuable, $500 Mac? Or would that simply cannibalize the higher margin Macs and reduce profits?

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