Apple Did Not Enter the Low-End Notebooks Market. So What?

Yesterday was definitely a big day for Apple with Apple fans eagerly waiting for the presentation of the new notebooks. As usually, there were some people extremely happy about the presentation and already promising to sell their slightly used Macbooks to replace them with new versions and there are those that are equally unhappy about many things Apple has introduced. But in the current economic situation the most important people are stock holders, not the fans that will replace one expensive laptop with a newer expensive laptop out of loyalty to the brand.

And shareholders are thinking about revenue and market share, not about how excited existing users are. So everyone was eagerly waiting for Apple to introduce a notebook in the sub-$1,000 price market. And as it usually happens when something is viewed as very much needed addition, we received our share of rumors that such laptops will arrive. Experts insisted a lower-end laptop is exactly what Apple needs to stay competitive at the times when luxury is not something people will buy focusing on affordability instead. Some market analysts even predict that a Macbook priced at $900 could increase Apple’s addressable market by 67%.

It is definitely worth mentioning here that Macs (both desktops and notebooks) play the vital role as a revenue source for Apple as they represent the largest portion of all the sales the company makes - estimated 47% this year. And this reliance on notebooks makes every decision in this field extremely important - hence all the pricing rumors and speculations.

But now we know that Apple is not introducing any laptops priced below $1,000 (I hope no one thinks that $999 for the white plastic Macbook is actually in that category for the consumer) so the question is if Apple manages to keep its notebooks business healthy without listening to the market analysts demanding cheaper machines that will be viewed more as a necessity by consimers.

For the time being Apple has clearly demonstrated that the company is planning to stay in the upper market category where the profit margin is simply better. But after choosing this position Apple will have to face a huge consumer dilemma (a dilemma consumers will inevitably be pondering over in the unfavorable financial environment): is quality more important than affordability?

I personally don’t know how valid the idea that the upper market for desktops and laptops will not shrink in the economic downturn is but Apple definitely seems to be pretty self-confident. Where I see the company could gain is in significantly improving its Macbooks line - here is where consumers could turn to instead of Macbook Pros for a comparable quality for a significantly lower price. Also the specifications of the new Macbooks could make the laptops appealing to more people contemplating finally converting from a PC to a Mac: these people could be unwilling to buy an expensive machine from the very beginning but could buy the significantly enhanced Macbooks if they see enough value.

It is hard to tell for now if Apple’s decision to continue pursuing the up-market with Macbooks, Macbook Pros and Macbook Airs is a reasonable one or if listening to analytics and coming up with a cheaper option could be better, but if there’s one thing I know, it’s that at least Apple does not face any risks in using aluminum in their much-hyped “brick” manufacturing technology as the price of aluminum has been falling since July and will probably continue doing so:

As for the Apple’s stock price, I believe we were simply waiting for too long and expected to see some laptops for $800 too much to believe that Apple can still be healthy without introducing the sub-$1,000 machine focusing on value for the money instead of the affordability. So it was quite understandable that after gaining tremendous 13% on Monday, Apple’s shares were 5% lower by the time Steve Jobs and his team completed the presentation on Tuesday and the market closed at $104.

But that was predictable - speaking to some people yesterday I knew that the opinion was the usual “Buy on the rumor, sell on the news” with everyone expecting at least some kind of disappointment from the presentation. Nothing unusual or unexpected here so we’ll have to wait for the next week’s quarter earnings report from Apple to get more rumors, more news and more stock price fluctuations.