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Apple Goes Budget Friendly

By Cynthia L. Webb
washingtonpost.com Staff Writer
Wednesday, January 12, 2005; 9:46 AM

The rumor mill had been churning for weeks, so Apple chief Steve Jobs's announcement yesterday that the company is releasing a sub-$100 iPod model and a budget-friendly Macintosh was hardly a surprise.

But the official unveiling of the two new products certainly generated plenty of buzz, and the media experts have offered up a resounding conclusion: Apple is finally ready to dump its reputation as a niche player that courts only a subset of PC users willing to spend extra bucks for its products. Nope, the quirky computer company from Cupertino is now aiming to convert millions of computer new users into Mac faithful.

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In its file on the Apple news, the San Jose Mercury News said the company is "transforming its image as the exclusive BMW of home computers into more of a mass-market Honda."
The San Jose Mercury News: Mac Mini Closes Value Gap Against Windows Computers (Registration required)

So what exactly did Apple unveil yesterday? In his keynote speech at Macworld, Jobs showed off the new $99 iPod model based on flash memory technology -- a product aimed at beating back competition from cheaper, upstart digital music players. The other star yesterday was the $499 Mac mini. Never mind that the price tag doesn't include a monitor, mouse or keyboard. The pint-size computer gives Apple a budget-wise PC in its portfolio. Mac fans reportedly rushed Apple stores and its Web site yesterday, even though the new computer won't be on sale until Jan. 22.

So what's this about ditching the niche label? The Mac mini "marks one of Apple's boldest moves yet to expand PC sales beyond a loyal but limited market of Mac addicts. The iPod and Apple's iTunes music store have been responsible for a dramatic surge in Apple revenue, but to date there has been little evidence that those products have done anything for Apple's PC business," CNET's News.com wrote. BusinessWeek said of the bargain $499 Mac and $99 iPod: "Discount prices like that may seem terribly un-Apple-like. But analysts say it points to a bigger, long-term strategy: Build from the iPod's success and win a whole new generation of converts to Apple technology. Many faithful may also give the offerings a try. But these products are aimed squarely at people who shy away from Apple price tags."
CNET's News.com: Apple Unveils $499 PC
BusinessWeek: Apple's Down-Market Gamble

The San Francisco Chronicle picked up on this theme: "Analysts said the new products represent a sharp departure for a company that has throughout its history steadfastly maintained it didn't need to sell a cut-rate, entry-level Macintosh because its computers had the kind of quality and innovation that could command a premium price. Critics have maintained that strategy relegated Apple to a small market niche while PC-makers sold cheaper computers. Now, however, both Apple executives and analysts say the success of the iPod and the growing use of digital music, photos and video give Apple a new opportunity to gain market share with entry-level prices," the paper said.
The San Francisco Chronicle: Big News Is Tiny

Analysts have been speculating on the "halo" effect the iPod will have on the company -- spurring sales of other Apple products. The Boston Globe latched onto Apple's new aim to offer affordable products, writing: Jobs "revived the company with a new motto: 'Think Different.' ... 'We want to bring even more people into the digital revolution,' Jobs said." The Globe continued: "Even an aggressive advertising campaign featuring disgruntled Windows users switching to Apple's Macintosh machines had little impact on Apple's market share. But Apple's iPod music player has been one of the most successful consumer electronics products of the decade, and the most popular device of its kind. Apple has sold over 10 million since they were introduced in 2001; yesterday Jobs said the company sold 4.5 million during the Christmas holiday season alone. Industry analysts said that by offering new, low-cost hardware, Apple is moving to preserve its dominance in music players while trying to win new customers for Macintosh computers."
The Boston Globe: Little Gadgets, Big Goals

Watch Out Microsoft...

The New York Times said "The new Apple strategy, which moves the company deeply into the consumer electronics market, positions the new Macintosh as an entertainment and communication device. It also promises to intensify Apple's battle with Microsoft in the personal computer market dominated by machines using Windows software. The move is in part propelled by Apple's success with its iPod digital music players; with 10 million sold in the last three years, the iPod has pulled Apple into the mass market. The popularity of iPod, analysts say, may persuade consumers who have not been Apple computer users to consider the Mac Mini."

The same article, however, indicated Apple has a long way to go to make a dent in Microsoft's market share: "But Apple's introduction of a low-priced machine is not likely to cut significantly into Microsoft's dominance in personal computing; more than 90 percent of PC's are Windows machines. More important, Microsoft is also moving to turn PC's into entertainment centers with its Windows Media Center Edition software, which lets a computer double as a television and video recorder. Gene Munster, an analyst at Piper Jaffray, said that Apple's consumers were probably not going to give up their Windows PC's but might buy a Macintosh as an additional computer for entertainment."
The New York Times: Changing Course, Apple Offers Low-Priced Mac For the Home (Registration required)

Jobs was very conscious of the Windows race during his remarks yesterday. "Jobs acknowledged that Apple has been criticized for its refusal to sell a computer to compete with more affordable entry-level systems running the Windows operating system. The Mac mini answers that criticism. 'People who are thinking of switching will have no more excuses,'' Jobs said," as quoted by the Merc in a separate article.
The San Jose Mercury News: $499 Mac Mini Takes Apple Into New Market (Registration required)

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