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How Dell ruined the industry with $500 PCs and why Apple won’t

How Dell ruined the industry with $500 PCs and why Apple won\'t

“We can’t ship junk. There are thresholds we can’t cross because of who we are. The difference is, we don’t offer stripped-down, lousy products.” — Steve Jobs

Every so often a new wave of articles and message board threads pop up online about Apple’s refusal to offer lower-priced Mac computers, thereby supposedly hurting their chances for major marketshare gains. PC makers like Dell and HP offer desktops and notebooks around $500 or $600, so why won’t Apple? There’s been a generally-held belief for years that Apple’s systems are more expensive than Windows PCs for no reason other than the fact that they have an Apple logo on them. While this may be true to a certain extent, there is more to the situation that may not be obvious to the casual bargain-hunting consumer.

Apple is a premium product provider. In the same way that BMW and Mercedes represent the golden standard for premium vehicles, Apple is at the top of the heap when it comes to building sleek and solid computers that just work. Attributes like Mac OS X, iLife ’08, and unibody aircraft-grade aluminum casing are all unique to Apple. Not to mention their excellent customer support and ability to run Windows and Linux software (with the help of tools like Boot Camp or Parallels). All of these factors add up to differentiate Apple’s products from those sold by competitors. Whereas all other computer vendors are forced to assimilate to whatever operating system features (and flaws) Microsoft decides to roll out, Apple can pave their own path and go in a different, often better direction.

Having established that Macs are vastly superior machines overall, what does that have to do with their choice not to play in the sub-$600 computer market when so many people buy systems in that price range? Quite simply, it’s because they don’t want to. That sounds like a pretty lame answer, but it is in fact the truth and it’s the right move. Apple’s name is synonymous with hip, cool, and (most importantly) quality products that stand out from the pack. People lust after them. They’re the envy of the entire industry. If they decided to put together a cheap computer with less features and poor quality components just to reach a low price point, it would ruin the reputation they have worked so hard to build.

Going back to the comparison I made with BMW and Mercedes, would you expect either of those companies to put a $18,000 car on the market? Absolutely not, because it would be a disaster of epic proportions. Consumers would no longer think of them as makers of superior performance vehicles — they would just blend into the crowd and become cheap impersonations of themselves. Their upscale brand names would be diluted to a point that may not ever be reversed.

Going back to Apple, their motto has always been to “think different.” In this case, thinking different has separated them from the commodity computer market that its slowly ruining Dell and HP. Sure, these companies have all the market share and are pushing out units left and right, but look at their profit margins. In order for them to make the same amount of money Apple gets from about 2.5 million Macs per quarter, they need to sell several times more units. Pushing out volume and making pennies on each sale is a terribly short-sighted business model that is coming back to haunt PC makers, specifically Dell. Even though they are still selling a large number of systems, they are laying off thousands of employees what seems like every 2 or 3 months.

How did PC makers get themselves in this unfortunate position? Right from the start, since they all run Windows operating systems, they were faced with the difficult situation of offering products that are extremely similar to each other. That’s quite the problem when you need to convince customers to choose your brand instead of the other guy’s. The solution companies like Dell chose to go with, of course, was to stunt technological advancement and cut corners to fool the general public with low price points. Why wouldn’t somebody want to spend $600 instead of $1200, right?

Instead of innovating the hell out of both software & hardware design and creating unrivaled product features like Apple, they took the easy way out and competed on price alone. Now, because they see them everywhere they go, unknowing consumers have been trained to think that computers are only worth $500-$700. Since these cheap systems have been turned into commodities, there’s still no real differentiating factors between those from Dell, HP, Toshiba, or Acer. What does that mean for the highly competitive holiday season? Slash prices even more, of course! Laptops are going for as little as $299 and $399, which is barely even enough to cover the retail price of Vista. I have a hard time believing any money is being made here and wouldn’t be surprised to learn that they are actually taking a loss to pump up market share numbers. This is extremely troubling for PC makers and will only get worse as time goes on.

Not only does competing on price eventually hurt the health of PC makers’ bottom lines, it also screws the consumers who fell for the low price tag. They have been jipped of some of the best things technology can offer by purchasing stripped-down, partially-featured, and under-powered computers which barely meet the system requirements for Windows Vista. Ultimately, these conditions add to up to create a less-than-stellar user experience. In constrast, this is where Apple picks up the slack and truly shines. You aren’t just buying a computer when you get a Mac — you’re getting a unique user experience with a multitude of features that are specifically built to work seamlessly together. This is what makes Apple who they are and it’s why they can’t sell bargain PCs like everybody else. Macs offer a greater level of value to consumers, proving the old adage of “you get what you pay for” to be entirely accurate.

Apple doesn’t pretend to be all things to everybody. They have a carefully defined target market which has proven to be very financially successful for them, particularly in the last two years or so. Some consumers may not fit into that target market and that’s okay. It’s unfortunate for those folks, but the general public is gradually warming to the idea of paying more for a premium product (thanks in large part to Apple’s brilliant advertising campaign). Instead of changing their philosophy to appeal to a broader range of markets, Apple is broadening the size of their market by convincing consumers to change their philosophy.

Check out the followup to this article, “Are Macs really worth it? Selling points for choosing Mac vs. PC

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17 Comments Have Been Posted (Leave Your Response)

Another reason for low prices on PCs is that the manufacturers are subsidized by those for whom they place “crapware” and trialware on their machines. It always takes me half a day to delete the junk from PCs. But my iMac came clean as delivered.

Excellent point, Craig. The amount of junk preloaded on PCs is embarrassing and really dillutes the user experience.

Though you do raise some valid points, I have to disagree with the general direction of the article. For too long the personal computer market has been seeing extraordinarily high prices across almost all makers. Until about three years ago, the average price that consumers would expect to pay in the US for a computer was around $1500. That same average consumer would primarily use the $1500 computer for web browsing, word processing, and email. This is akin to buying a Ferrari to use for commuting. I do believe in the addage ‘you get what you pay for’ – the problem is that in most cases the people are paying for stuff that they don’t need or want. I find that the ultra-cheap computers such as the eeepc leave their users happier than the more expensive products in most cases, and with more money in their wallets too. I enjoy the features and innovation that Apple and other high end makers are creating by pushing the industry forward, but I feel that it makes technology inaccessible to those who can’t afford high end machines. Bring the prices down and get the whole world on the ‘net.

I am a sustem admin for a network that houses many macs. They are good machines but many of them have serious hardware failures all the time. I dont see how you can call it supperior to something else. Basically if it doesent brake its superior and I have windows 2k machines that have been running for 10 years without any issues. Macs are super over prices and could be made much cheaper. Then there would be nothing left for that hefty marketing budget.

Hi there.

Interesting article, but I think you´ve missed an important point about this case. Since 3 years ago, computers´s prices have been going down for the simple reason that computer components have been doing as well.

Add the fact that, since the intel-chips change, Apple computers more than ever (except the new aluminiun unibody models) are pc alikes. If you check the components in a Mac, are exactly the same than you can find in mid-range pcs.

Notice that the only real differences against a pc models with the same hardware are:
– Mac OSX – 129$
– Unibody (exclusive case)

And that´s all folks. The diference in prices (up to 600$) is completely absurd. Make numbers and tell mi if you are not paying (in big part) nothing but the brand.

It’s great to see everyone’s feedback – I’m glad this is opening up a discussion about this topic. I would like to point out that it’s very easy to understate the differences between PCs and Macs when you’re trying to directly compare prices on hardware specs alone. There are other benefits of using a Mac that people often overlook. Not to mention the fact that most PCs don’t come with components like gigabit ethernet, bluetooth, n-wireless, etc. by default in most cases. In a future article (probably this weekend), I’ll explain more about what I mean.

UPDATE: A new follow-up article has been posted – Are Macs really worth it? Selling points for choosing Mac vs. PC

Notice that the only real differences against a pc models with the same hardware are:
– Mac OSX – 129$
– Unibody (exclusive case)

When you buy an Apple, you support the progress of innovation. You pay for things like the unibody, the clever mag-safe adaptor, the battery life indicator, the unmatched aesthetic appeal, and the FAR superior OSX platform that is continually evolving to set the standard for how you operate a computer. Sure, you can compare hard drive size, processor speed, ram and video cards to find a PC equivalent, but you’re missing the point if you don’t put significant weight on the “little” things that only Apple computers offer.

Sorry but the BMW/Mercedes analogy is flawed and therefore so are contentions and conclusions based thereon. It completely ignores the European market for starters where small entry-level vehicles from both makers along with Audi et al are available for a very reasonable price. Second, BMW and Mercedes have both experienced a significant number of quality control issues in their lines. Mercedes in particular has taken an absolute shelling in the UK press over their QC problems and their market share and public perception have suffered accordingly.

I realize this is a puff piece meant to reinforce the same old Apple-is-great-and-different-therefore-so-is-its-user-base argument but as someone once said facts are stubborn things.

go to dell or any other maker and price a computer with the same specs as a mac and i think you will all be surprised. they are usually cheaper. they just refuse to sell a watered down product.

Ok, here is where Macs have an advantage: (based on your article)
1. Unibody Aircraft-Grade Aluminum- Ok cool its all one piece of extra expensive aluminum, good thing my laptop is also my airplane.
2. Mac OSX vCatSpecies – Ooh look iLife! It has all the same basic things that comes with Windows, just presented in a different GUI. Yay!
3. More Expensive because we think were better. YAY! I’m supporting being different becuase I am following the belief than I can only use the few limited programs that come with my mac or a few extra ones, and the small applets that are also made for linux/Winows Woot.

Here is my issues with your arguments.
1. Your comparing a $1000+ hardware’d computer vs a $400 hardware’d computer? Why don’t you compare the equal models for both companies and you’d find that Windows systems generally have better hardware at a cheaper price. As for those 400 and 500 dollar computers, their hardware specifications are, OMG This can’t be real, better than the precious Macs that you proclaim are better.
2. Mac OSX isn’t amazing because it can dual boot. My laptop is dual booting Windows and Linux as it is right now. Dual booting is not new, and its not that great. I have windows installed on my iMac, and really I only use the windows. I rarely use the OSX software because of its limiting nature and its “close-mindedness” towards other programs I run and use.
3. Your comparing cars to computers? And you still don’t understand why the prices are different? You are paying for a label, thats it with mercedes and bmw. Also there is a thing called technological advancement, where competition brings out cheaper prices for better goods. Since Apple will not let others run OSX they create a monopoly, and therefore keep their prices higher and paying more for a product that simply isn’t worth it. Ex: Add $1000.00 to a macbook pro for an addition 4 gigs of ram. 4 gigs to 8 gigs, $1000? really? the real cost of that upgrade is about $200, so they are just charging for their monopolistic control and they make it all right by making you “think different.” So good job, keep supporting a company that doesn’t encourage competition, and enjoy paying incredibly steep prices for computers that are sub par with their windows counterparts. (Hardware based of course, the OS is completely more subjective in my opinion since they basically out of the box host the same things, but windows still is more customizable.) So think different and learn you’re “facts” before you write an opinionated and completely subjective article.

I have to agree with those who say Apple hardware is not better.

I’m a System Admin as well, and although the XServe is a remarkably stable product, Mac’s laptops have had significant hardware problems, and by no means are they superior. I’ve worked in dual platorm organizations, and although I prefer Mac, from my experience there are more issues with Apple hardware than there are with PC hardware.

You are paying for the brand and the excellent overall product that Apple brings to the consumer. But to pretend that Apple hardware is better in execution is just wrong.

Um, Chester… that RAM Apple is selling for $1000 when you claim its only $200 is actually DDR3 memory. In other words, its higher performance RAM and therefore more expensive. Even on a site like two 4GB sticks of DDR3 RAM are like $750 minimum. Maybe it’s you who should be checking your facts before commenting.

Okay… Well this is an interesting article but that sad part is that it was written on a MAC site… Of course its going to favor mac if it didnt it wouldnt be posted on the website.. And also i have this strong feeling that the author of the article has very much a loyalty to mac as u can clearly pick up in the article. All tho a well made arguement this kinda seems like a bumch of kids fighting over whos toy is better… In this time and place there is no supieor. Both styles have their pros and cons.. get used to it is life.. their will never be a hands down winner

Doesn’t it seem like some of the comments on here are missing the point of the post? This has turned into a slugfest over whether Macs or Pcs are better. Really the original idea at least from what I got out of it is that Apple purposely doesn’t make products for the cheap segment of the market. So all of you people who saying that there’s a place for thse cheap computers are just proving the point. Apple doesn’t care about you. They don’t want you as a customer because you don’t appreciate what they do, thherefore there’s no profit to be made from you. Nobody said Macs were meant for everybody.

To those that think Windows is much better than Mac.

I do not agree with the statement. You can’t just compare the two Graphical User Interfaces and the Aluminum Unibody. Think about it, why would Steve Jobs put down a high price for a computer that can:

*has a multi-trackpad
*faster in ram and rom
*larger space of memory
*lightest computer in the world (macbook Air)
*Mac OSX
*99% of Anti- Virus.
and trust me, there’s lots more.

I have a MacBook Air and it’s incredibly amazing. Steve Jobs is smart. I’m not saying that Bill gates isn’t smart, but Jobs’s better, in fact! He thought of life, to make it easier.

“If you’re good at using Windows, then, you’re a champ in using Mac.”
-My point is that Mac is basically easier than Windows.

Trust me guys! Apple’s system or software is much much better than Windows.

In my house we have Win XP, Win 7, Droids, iPads (1 and 3), iMac, and a Macbook, and 2 Linux VMs running on the Win 7 box.

Macs seem to be developed for people who don’t want to make decisions. You get what Apple gives you, end of conversation. Windows is for tweakers.

Macs drive me crazy because I’m forced to set things up and use only what Apple deems to be correct. For example. You want to run backups? You have the Apple cloud option or Time Machine. Well, I want to use a system that backs up Mac files to a remote site I own and I only want changes written to the remote site. On my Windows boxes, I just run the free version of SyncBack and it’s freaking awesome. Mac fan boys? I spent a fair amount of time looking around and found nothing suitable.

Mac hardware always ‘just works’? Bull! We bought a really nice iLife keyboard for the iMac. The very first Mac OS update (not even a version change) caused the Mac to lock on boot. Disconnect the keyboard and go back to the crappy standard mini-keyboard and it’ works. It’s been over a year and NO new drivers. W – T – F? It’s a stupid keyboard, why does it crash the Mac?

And don’t even get me started on iTunes. The stupid app decides where my library is going to live and if I try and switch to some new location (say a network share), the updates push it back to the standard location. STOP HELPING ME.

Say what you want about Win security but it’s gotten better over time and now you’re beginning to see Mac malware so the delta between Win and Mac is getting smaller.

On the iMac, I am not a fan of putting the application menu into the top bar; keep it with the stupid app window where it belongs. On a small screen, it’s not a huge deal but the iMac has a monster screen and if my app window is low on the screen, I have to move the mouse about 2′ to get to the menu. What a waste of effort.

The cursor/pointer is freaking tiny. On my Win/Linux box if I want a bigger pointer, it’s a no brainer. On the iMac? BUY a pointer app or convert it to some clunkly low res bit mapped ugly pointer for free. Oh yeah, that’s elegant design!

Not a fan of the buttonless mouse; if I right click the mouse, I’d like to know where the ‘button’ is so it works every time I hit that side of the mouse.

They’re pretty and if you’re a high end graphics designer, they’re the way to go but for my money, I’ll stick with Windows and Linux (and oh BTW, the Mac OS is nothing but Linux/BSD locked down under the hood so it’s really not all that special anyway).

To each her own but I am not impressed.


Thanks for visiting MacYourself! I just want to make a few points based on your comment.

There are a ton of backup options other than Time Machine and iCloud. Have you looked into SuperDuper, Carbon Copy Cloner, or even the online providers like Carbonite, Mozy, etc?

I’m not sure what you’re referring to by an “iLife keyboard.” There must be some kind of incompatibility or glitch, but most of these things can be resolved with common troubleshooting steps.

iTunes is very capable of letting users choose the location of their media files, whether it’s on an external drive or a custom folder on the internal drive. It’s just a matter of configuring the iTunes preferences correctly.

As far as security goes, it’s true Windows has gotten better than the days of XP. But it’s still plagued by malware and security holes. Security software is still a necessity for all users. In the rare case that a security hole does get exploited for Macs, Apple fixes it instead of relying on users to install 3rd party security software. Is Apple perfect? No. Will holes continue to be found? Of course. But the security situation is much better on Macs than Windows PCs.

From what you’ve said, you’re a long-time Windows and Linux user who decided to give Macs a try. To truly appreciate the different experience Macs bring, switchers have to let go of all prejudices and go into it without any bias. Most of the time, people are pleased with their decision. But Apple has a very specific target audience in mind: users who just don’t want to deal with “managing” their computer. If you’re someone who likes to tweak and have control over every aspect of their computer, then a Mac just isn’t the right computer for you – and it wasn’t meant to be.