Greg's Bite: Apple's hardware prices matter
TweetFollow Us on Twitter

Greg's Bite: Apple's hardware prices matter

By Greg Mills

I was idly wandered through the brand new Sam's Club here in Kansas City, Kansas, Friday afternoon. The store is just around the corner from my home. A neighbor, living just a few doors down the street, is the proud manager of the giant new store.

I was there at the grand opening a couple of weeks ago and actually ate the first "tomane torpedo" sold at the food court. Where else can you get a large Nathan's hot dog and giant soft drink for $1.50? 

As I was sampling the free bites of food they give away, I stumbled into the electronics department. The products on sale were all the Apple tablets, iPhones and iPods, as well as the brands X, Y and Z semi-equivalents. Features and prices varied wildly. 

The electronics guy reads my Greg's Bite articles. He commented as soon as he saw me, that as far as he was concerned, I had hit the nail right on the head in my recent article regarding Microsoft's constant marketing gaffs.  I like it when even the die-hard PCs out there have to agree with my sarcastic, and somewhat critical, view of Microsoft and the "great tongue" himself, Steve Ballmer.  

I have found that while many Apple faithful really like the company and care about Apple, a lot of PC users actually deeply distain Microsoft but stick with that platform for reasons imagined or real only in a past lifetime. The day when you simply couldn't get by with just a Mac due to certain PC-specific software titles or features has pretty much been over for a while now. Ever since you could run (shudder, gag, wince) Windows on modern Macs, that argument has been slowly fading away.  Another myth that is also dying out is that Apple products are super expensive. While still a bit higher priced than PCs, the Apple "premium" has largely been eliminated.

My son Isaak hates it when I tease him that running Windows on his MacBook Pro is like keeping pigs in the back seat of a brand new BMW. He is much more "cross platform" than I am. Partitioning your hard drive and running two operating systems seems to lead to headaches he constantly deals with that I can do without.  

I was discussing with the Sam's Electronics guy the cracked keyboard issue that might cause a complete recall of all Surface tablet cover/keyboards sold so far.  It seems, according to Steve Ballmer, that users are "holding them the wrong way" and curling them under, in such a way that the plastic hinge that connects the tablet to the keyboard breaks and exposes wires. This issue really makes the Surface computer keypad unusable in salt water.

The public relations department at Microsoft released a statement on the cracked keyboard issue: "Microsoft makes every effort to ensure our customers receive a high quality product. We are in active contact with our Customer Support operations and are aware of a small number of instances of material separation,"  

A "small number" of keyboard defects was not quantified by Microsoft's pubic relations spin department. Since the Surface has only been on the market two weeks, one wonders how long until all such keyboards break. Ironically, another issue has been that the Microsoft logo printed on the Surface computer is rubbing off. Some enterprising person will no doubt be selling Apple logos to slap on over the smudged Microsoft logos. That ought to enhance Surface tablet resale values dramatically, but might be an illegal deception amounting to criminal fraud. There are stupid people out there.  

Did you hear about the woman who bought a mirror with one of those Apple logo decals stuck to it as an iPad from a huckster selling implied "stolen goods" for cheap? Before she figured out she had been hoodwinked, the salesman and her $200 were long gone.  I had a guy try to sell me concrete blocks sealed up in cardboard boxes as high quality stereo speakers. He refused to open the boxes to allow me to see the speaker before I paid him since they were "factory sealed" ... yeah, right. A deal that is too good to be true normally is.   

Sounds like Microsoft is facing "recall city" just in time for Christmas.  Fortunately, with actual worldwide sales of the Surface Computer and Keyboard accessory to date, according to my best estimate, at less than a thousand, it shouldn't hit Microsoft's bottom line too hard. (I am not counting internal sales to Microsoft staff, samples to tech writers or Surface tablets that have been returned by angry consumers)  This explains the divergence of my estimate and Microsoft's recently published sales numbers.

As we were discussing Microsoft latest gaffs a lady walked up and picked up a demo iPad 3. My electronics friend gave her his attention, and I stepped back to allow him to talk with her. She noted out loud the price for the Apple tablet and put it back like it cost money to even touch it.  After she was out of ear shot, we discussed the prices Apple had put on its current offerings.  

Keep in mind that when Steve Jobs launched the iPad, the air in the room was sucked out as the $500 base price was hundreds of dollars lower than industry expected. Everyone inhaled at once. Since Amazon launched its cheapo loss leader tablets, Apple iPads only seem expensive to those who really don't understand the difference. As I pointed out to my daughter's teacher, if you buy an iPad the Kindle app is free. You buy a Kindle and that is all you have.

Price comparison alone is sort of like comparing a baloney sandwich on Wonder Bread with a steak sandwich on a freshly toasted croissant by price alone. Both sandwiches are theoretically eatable, but the steak sandwich costs more. Quality counts. people. I suppose if you have never had a steak sandwich, baloney sandwiches are better than going hungry, but just barely.

Comparing the Apple tablets with Amazon tablets strictly on what they cost consumers out of pocket is really deceptive for fundamental reasons. Apple makes its money on hardware sales and some money down line on apps and accessories.  Amazon just breaks even or loses a bit on each cheap tablet they sell.  The difference between Apple and Amazon is in the marking plan after the consumer plunks down their tablet money.  

Amazon figures the closely linked loss leader tablets they sell will pay off in the long run through sales at Amazon.com. Apple actually has it both ways. The margins for an iPad run around 40%, and Apple still sells apps and accessories down line. The new iPad mini has a slightly lower net margin than previous iPads, but even at the lower price point, Apple makes money on each tablet they sell. I recently bought my iPhone 5 with my iPad through the Apple on-line store app. 

It has been speculated that once the tablet market becomes saturated with iPads of both sizes Apple will cut prices to continue to keep pressure on the competition.  As I have noted previously, since Apple knows they will be stretched to keep up with demand at higher price points, why cut prices to the bone until supply catches up with the runaway demand? Apple makes money by being smart about its prices.  Cook isn't going to leave money on the table.

Apple products tend to be the gold standard for electronics. Microsoft launched its Surface tablet at exactly the same entry point as Apple's iPad. This tends to set expectations at an equal level and likely sets up consumers to be very disappointed and angry. When you realize the steak sandwich you bought from Microsoft tastes a lot like baloney, product returns and crappy product reviews are sure to hurt their market share. That is already happening.  

Dire predictions that the glory days at Apple are over are really off base. As long as the tradition of quality and elegance continues at Apple, continued growth is assured. While some people shop based purely on price, the rest of us would rather buy the BMW than the crappy Ugo car. Quality costs something. Personally, I am willing to pay a few buck more and have a better experience over the lifetime of my electronic devices. (I have an iPad mini coming Monday).

I will be posting an article next week on the HTC/Apple patent cross licensing deal and the ramifications for Android. I am also watching to see if Cook offers Ron Johnson his old job back since the "new JCPenny" is about to fire him before he bankrupts them.  

That is Greg's Bite.

 
AAPL
$98.15
Apple Inc.
-0.23
MSFT
$43.58
Microsoft Corpora
-0.31
GOOG
$587.42
Google Inc.
+1.81

MacTech Search:
Community Search:

Software Updates via MacUpdate

Mellel 3.3.6 - Powerful word processor w...
Mellel is the leading word processor for OS X and has been widely considered the industry standard since its inception. Mellel focuses on writers and scholars for technical writing and multilingual... Read more
LibreOffice 4.3.0.4 - Free Open Source o...
LibreOffice is an office suite (word processor, spreadsheet, presentations, drawing tool) compatible with other major office suites. The Document Foundation is coordinating development and... Read more
Freeway Pro 7.0 - Drag-and-drop Web desi...
Freeway Pro lets you build websites with speed and precision... without writing a line of code! With it's user-oriented drag-and-drop interface, Freeway Pro helps you piece together the website of... Read more
Drive Genius 3.2.4 - Powerful system uti...
Drive Genius is an OS X utility designed to provide unsurpassed storage management. Featuring an easy-to-use interface, Drive Genius is packed with powerful tools such as a drive optimizer, a... Read more
Vitamin-R 2.15 - Personal productivity t...
Vitamin-R creates the optimal conditions for your brain to work at its best by structuring your work into short bursts of distraction-free, highly focused activity alternating with opportunities for... Read more
Toast Titanium 12.0 - The ultimate media...
Toast Titanium goes way beyond the very basic burning in the Mac OS and iLife software, and sets the standard for burning CDs, DVDs, and now Blu-ray discs on the Mac. Create superior sounding audio... Read more
OS X Yosemite Wallpaper 1.0 - Desktop im...
OS X Yosemite Wallpaper is the gorgeous new background image for Apple's upcoming OS X 10.10 Yosemite. This wallpaper is available for all screen resolutions with a source file that measures 5,418... Read more
Acorn 4.4 - Bitmap image editor. (Demo)
Acorn is a new image editor built with one goal in mind - simplicity. Fast, easy, and fluid, Acorn provides the options you'll need without any overhead. Acorn feels right, and won't drain your bank... Read more
Bartender 1.2.20 - Organize your menu ba...
Bartender lets you organize your menu bar apps. Features: Lets you tidy your menu bar apps how you want. See your menu bar apps when you want. Hide the apps you need to run, but do not need to... Read more
TotalFinder 1.6.2 - Adds tabs, hotkeys,...
TotalFinder is a universally acclaimed navigational companion for your Mac. Enhance your Mac's Finder with features so smart and convenient, you won't believe you ever lived without them. Tab-based... Read more

Latest Forum Discussions

See All

Empire Manager (Games)
Empire Manager 1.0 Device: iOS iPhone Category: Games Price: $3.99, Version: 1.0 (iTunes) Description: Become ruler of an empire. Manage your economy, develop technology, hire an army and conquer the world in this addictive turn-... | Read more »
Empire Manager HD (Games)
Empire Manager HD 1.0 Device: iOS Universal Category: Games Price: $7.99, Version: 1.0 (iTunes) Description: Become ruler of an empire. Manage your economy, develop technology, hire an army and conquer the world in this addictive... | Read more »
Star Admiral Review
Star Admiral Review By Rob Thomas on July 30th, 2014 Our Rating: :: ADMIRABLE ADMIRALSUniversal App - Designed for iPhone and iPad While this new digital CCG may feel a bit familiar, Star Admiral offers a sci-fi twist and galaxy’s... | Read more »
Zap! Pow! Become a Badass Wizard in Phan...
Zap! Pow! | Read more »
Urban Trial Freestyle Review
Urban Trial Freestyle Review By Blake Grundman on July 30th, 2014 Our Rating: :: RIDIN' DIRTYUniversal App - Designed for iPhone and iPad A rough ride that has trouble keeping its wheels on the track.   | Read more »
Take Note! Noteshelf Has Recieved a Big...
Take Note! Noteshelf Has Recieved a Big Update. Posted by Jessica Fisher on July 30th, 2014 [ permalink ] iPad Only App - Designed for the iPad | Read more »
Cubama Review
Cubama Review By Nadia Oxford on July 30th, 2014 Our Rating: :: TETRIIIIIS IIIIIN SPAAAAACE!Universal App - Designed for iPhone and iPad With its addictive challenge and interesting premise, Cubama is frantic screen-tapping fun.   | Read more »
Become a Guardians of Galactic Peace Wit...
Become a Guardians of Galactic Peace With the New Spacefaring Sim, Kairobotica. Posted by Jessica Fisher on July 30th, 2014 [ permalink ] | Read more »
Soul Guardians: Age of Midgard Review
Soul Guardians: Age of Midgard Review By George Fagundes on July 30th, 2014 Our Rating: :: SO MUCH GRIND IT CRUNCHESUniversal App - Designed for iPhone and iPad Swords and trading cards are fun, right? So is Soul Guardians: Age of... | Read more »
NFL Fantasy Football App Redesigned Ahea...
NFL Fantasy Football App Redesigned Ahead of Upcoming 2014 Season Posted by Ellis Spice on July 30th, 2014 [ permalink ] | Read more »

Price Scanner via MacPrices.net

More iPad Upgrade Musings – The ‘Book Mystiqu...
Much discussed recently, what with Apple reporting iPad sales shrinkage over two consecutive quarters, is that it had apparently been widely assumed that tablet users would follow a two-year hardware... Read more
13-inch 2.5GHz MacBook Pro on sale for $999,...
Best Buy has the 13″ 2.5GHz MacBook Pro available for $999.99 on their online store. Choose free shipping or free instant local store pickup (if available). Their price is $100 off MSRP. Price is... Read more
Save up to $300 on an iMac with Apple refurbi...
The Apple Store has Apple Certified Refurbished iMacs available for up to $300 off the cost of new models. Apple’s one-year warranty is standard, and shipping is free. These are the best prices on... Read more
WaterField Unveils 15″ Outback Solo & 13″...
Hard on the heels of Apple’s refreshed MacBook Pro Retina laptops announcement, WaterField Designs has unveiled a 15-inch version of the waxed-canvas and leather Outback Solo and a 13-inch version of... Read more
New Roxio Toast 12 Delivers Digital Media Pow...
Roxio Toast 12 is a hub for sharing digital media to virtually any platform or device. has introduced two new additions to its Roxio Toast product family – Roxio Toast 12 Titanium and Roxio Toast 12... Read more
The lowest prices on leftover Retina MacBook...
Best Buy has dropped prices on leftover 13″ and 15″ Retina MacBook Pros by up to $300 off original MSRP on their online store for a limited time. Choose free local store pickup (if available) or free... Read more
Apple Updates MacBook Pro with Retina Display...
Apple today updated its MacBook Pro with Retina display with faster processors and double the amount of memory in both entry-level configurations. MacBook Pro with Retina display features a Retina... Read more
Up to $250 price drop on leftover 15-inch Mac...
B&H Photo has dropped prices on 2013 15″ Retina MacBook Pros by as much as $250 off original MSRP. Shipping is free, and B&H charges NY sales tax only: - 15″ 2.3GHz Retina MacBook Pro: $2349... Read more
Updated MacBook Pro Price Trackers
We’ve updated our MacBook Pro Price Trackers with the latest information on prices, bundles, and availability on the new 2014 models from Apple’s authorized internet/catalog resellers as well as... Read more
Apple updates MacBook Pros with slightly fast...
Apple updated 13″ and 15″ Retina MacBook Pros today with slightly faster Haswell processors. 13″ models now ship with 8GB of RAM standard, while 15″ MacBook Pros ship with 16GB across the board. Most... Read more

Jobs Board

Sr Software Lead Engineer, *Apple* Online S...
Sr Software Lead Engineer, Apple Online Store Publishing Systems Keywords: Company: Apple Job Code: E3PCAK8MgYYkw Location (City or ZIP): Santa Clara Status: Full Read more
Sr Software Lead Engineer, *Apple* Online S...
Sr Software Lead Engineer, Apple Online Store Publishing Systems Keywords: Company: Apple Job Code: E3PCAK8MgYYkw Location (City or ZIP): Santa Clara Status: Full Read more
*Apple* Solutions Consultant (ASC) - Apple (...
**Job Summary** The ASC is an Apple employee who serves as an Apple brand ambassador and influencer in a Reseller's store. The ASC's role is to grow Apple Read more
Sr. Product Leader, *Apple* Store Apps - Ap...
**Job Summary** Imagine what you could do here. At Apple , great ideas have a way of becoming great products, services, and customer experiences very quickly. Bring Read more
*Apple* Solutions Consultant (ASC) - Apple (...
**Job Summary** The ASC is an Apple employee who serves as an Apple brand ambassador and influencer in a Reseller's store. The ASC's role is to grow Apple Read more
All contents are Copyright 1984-2011 by Xplain Corporation. All rights reserved. Theme designed by Icreon.