BusinessWeek: Apple Needs To Lower Prices

BusinessWeekis Alex Salkever has some bottom line advice for Apple: Lower prices. This pearl of wisdom comes in Mr. Salkeveris weekly look at the Mac industry, Byte of the Apple, and this weekis column is all about Appleis recent financial earnings report. Topics addressed include the issues surrounding whether or not Apple should report stock options as an expense, sustainability of the iPod as a major revenue source, and whether or not Apple should pay dividends. He concludes, however, with the advice that Apple should dip into its margins, the highest in the industry, and lower prices in order to grow the Macis market share. From the column:

Finally, thereis the computer-sales-growth number. Apple managed to increase it by only 5% for the quarter, year-over-year. Worldwide PC shipments in the first quarter of 2004 grew 13.4%, according to technology consultancy Gartner. That means in relative terms Apple is falling behind by growing more slowly than its rivals.


STEP BY STEP.  So while itis great that Apple seems to be winning the digital-music race, a little perspective is in order. Mac sales really need a lift, and thereis a simple way to do this: cut prices. Consumers still see Macs as the most expensive PCs around. And so far, the G5 has been a sales disappointment.

Apple needs to learn that price is determined by market demand and not its own perception of what products are worth. Its prospects look brighter now than at any point in recent memory, and it still boasts some of the fattest margins -- if not the fattest -- in the business for its PCs. Jobs & Co. has the tools to really turn Apple into a mainstream player if they can boost computers sales by dropping prices. Apple has the cash to reward shareholders with dividends. And it can easily afford to own up to stock-options expensing. Itis up to the board of directors to perform the reality check necessary to shore up Appleis future.

Thereis more in the full column, and we recommend it as a very interesting read.