If Apple's new products are priced right, they might even allow Apple to do with its computer lineup what it has already done with music players: win the pricing game by owning the low end of the market with a high-margin product.
Author : Brian Caulfield
The company's savvy product pricing will likely help its earnings.
They say a sage can see the universe in a grain of sand. Well, the rest of us will have to settle for seeing Apple in the sliver of a music machine. It's called the iPod Shuffle, and it tells you everything about the Cupertino, Calif.-company you need to know.
The business model behind the Shuffle that Apple introduced last month is even better looking than its uncluttered exterior. The latest generation of Apple's tiny music player is voice-controlled, so there's no need for a display or click wheel.
Each 7.8-millimeter-thick gizmo has only 171 parts, down from 213 parts on the previous-generation device, according to technology researcher iSuppli. The El Segundo, Calif., outfit figures each Shuffle costs Apple just $21.77 to make. The result: iSuppli says the $79 iPod is one of Apple's most profitable products.
Such skillfully priced products are a big part of the reason analysts estimate the economic slump will take a modest 6% bite out of Apple's earnings for the quarter ending in March. Analysts expect Apple on Wednesday to report net income of $982.3 million, or $1.09 cents per share, on revenues of $7.9 billion, according to a survey conducted by Thomson Reuters. During the corresponding quarter a year ago, Apple reported net income of $1 billion, or $1.16 per share, on revenues of $7.5 billion.
And, of course, these numbers don't include the hefty chunk of deferred earnings from the iPhone that aren't counted in net income.
While Apple is thriving by selling high-margin, low-priced iPhones and music players, PC makers, by contrast, are undercutting their business models with low-priced notebook computers known as "netbooks." It's a craze that Apple has bypassed, so far.
Nevertheless, avoiding the low end is a dangerous game in a recession. After years of attack ads from Apple, Microsoft is jabbing back. Its latest ads have camera crews following around shoppers who discard Macs with lines such as "I don't want to pay for the brand, I want to pay for the computer."
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Published in : Forbes on 04.21.09