Does Apple Want To Sell a $500 Mac?

Over the past week or so, rumors of a "headless iMac" selling for US$500 have been all over the Web. And I don't just mean the Mac rumor sites - The Register, The Street, and other non-Mac sites have spread their thoughts as well.

I'm all for a $500 headless Mac, but I think Think Secret> is off base in calling it a "headless iMac" and some of the things Apple is going to do to keep the price down.

First of all, the iMac is a G5-based computer, and the "insides" of the iMac are behind the screen, so a "headless iMac" would be a 2" vertical slab computer with a G5 CPU. Anything less would make it less than an iMac.

No, if there is anything to these rumors, it's the eMac that should be replaced. Apple is selling the 1.25 GHz eMac for US$799 with an internal 17" display. By removing the CRT, the electronics that drive it, moving to a smaller power supply, and being able to ship a lighter computer in a smaller case, Apple should be able to trim the price.

Let's look at the numbers and some realities of the marketplace. If Apple can shave $100 from production, packing, and shipping costs, they can slash $200 off the retail price.

Further, Apple is undoubtedly paying less for memory, hard drives, optical drives, and 1.25 GHz G4 CPUs than they did when the current eMac was announced last April. That alone could account for another $50 drop in the retail price.

It's conceivable that Apple could sell a "headless eMac" for $550 and still turn a profit. After all, The Apple Store sells refurbished eMacs (the 1.25 GHz Combo drive unit) for $649 shipped - and you can rest assured that Apple isn't losing money on them.

Apple also sells special educational versions of the eMac. These run at 1.0 GHz and include CD-ROM drives instead of Combo drives. They also sell for less than the regular consumer eMac.

Put it all together, and we're starting to see how Apple could sell a headless Mac for $500 if they wanted to.

The Next eMac

My guess is that Apple will be replacing the eMac, either at this month's Macworld Expo or in April or May, the same time frame each version of the eMac was announced. And I think Apple may finally move away from built-in CRT displays. Here's my guess.

The headless eMac will be called an eMac plain and simple. It will still use a G4 CPU, but it will also be faster - 1.5 GHz on the top, and 1.25 GHz on the lower-cost entry-level models.

It will probably continue to use IDE hard drives; there's no reason to switch to Serial ATA drives on a consumer computer right now. (That could change as economies of scale kick in with more widespread Serial ATA adoption.) I'd guess Apple will use the least expensive (slowest, lowest capacity) drives they can get and still market, so 40 GB might still be the entry point.

The entry-level models with have ATAPI CD-ROM drives, just as Apple currently does for the education market. Combo drives and SuperDrives will be options.

Base RAM will remain at 256 MB with a single expansion slot, as on Apple's laptops. Maximum supported RAM will be 1.25 GB.

The new eMac will have a pair of speakers up front, and the optical drive will probably be hidden behind a door. It should be a bit narrower than the current eMac, and it won't need to be nearly as deep or as high. As a guess, 12-14" wide, 4-5" high, and 9-10" deep.

The base eMac could sell for $499 with a CD-ROM, 40 GB hard drive, 256 MB RAM, and no modem. A Combo drive model with a modem could sell for $549 at 1.25 GHz or $599 at 1.5 GHz. The top-end SuperDrive model could retail for $749 with an 80 GB hard drive.

These are realistic prices, although I doubt Apple would go quite that low. My guess would be $50 higher, so the above prices would be for the education market.

Or Apple could follow the trend in the Wintel market and include fairly cheap mice and keyboards, thus hacking another $50 or so from the retail price.

The Market

If Apple were to sell a headless Mac for under US$600, you can bet they'd do the same kind of thing Dell, Gateway, and the others do - push add-ons. First, there's the monitor. Apple might offer a relatively low-cost 17" third-party CRT for $150-200, and a headless eMac would give Apple the opportunity to reenter the lower end of the LCD market with 17" and 20" displays.

Memory would be another profit center. OS X works with 256 MB, but you don't unleash it until you have a lot more RAM. Adding a 256 MB or 512 MB module would boost Apple's bottom line while boosting the user's performance.

Everyone wants to burn CDs, so bumping buyers up to a Combo drive shouldn't be hard at all. And if they like music, maybe add an iPod and subwoofer.

Apple could offer a better mouse and keyboard, if they choose to go with cheaper input devices on the headless Mac. Bluetooth and wireless input would be an option for those who don't want cables.

The key is that although Apple could sell the base eMac for $500 and make a profit, most users will want more - a lesson the Windows side learned years ago. But most of all, Apple would be able to offer a US$499 computer with no need to mail in rebates, no worries about viruses and spyware, and no need to stick with a built-in 17" CRT display.

Will They?

I don't think Apple wants to grow their market. The lack of a low-cost headless consumer Mac since 1998 says it all. In the Windows world, people buy computers and monitors. Mac users only have that option well beyond the US$1,000 mark.

Apple knows what they have, they know who buys it, and they know exactly where the PC market is. If they wanted to penetrate it, they could have done so at any time after the original iMac launched. The fact that Apple has not done so speaks volumes.

Is Apple afraid of success? Their history is littered with runaway best sellers at the bottom end of the price list - the long-lived Mac Plus, the Classic, the LC, various Performas, and the CD-ROM iMacs among them. As MaVue> commented last week,

"Anyway I look at this, the cheaper the product the better Apple does. In the 90's Apple managed to sell a lot of computers with the $999 price tag. This Christmas the majority of the sales have been for the cheaper $249 iPod mini."

Whether we're looking at flash-based iPods or Macs, the opportunity is there just waiting to be exploited. Unless Apple gets serious about growing their market, it just isn't going to happen.

We'll know more about Apple's market philosophy when they unveil their new products next week. My guess is that Apple will continue to leave the low end of the personal computer market to Microsoft, Intel, Dell, Gateway, and the rest.

The computer "for the rest of us" will remain outside the budget of the average computer buyer, and only sites like Low End Mac will help potential switchers find the kind of deals on recent and refurbished Macs that make Macs more affordable.