Apple's New Entry-Level iMac Will Create Heartburn in PC Land

When Apple saw what the iPad was doing to the sales of PCs, the company must have been very pleased. And with the Mac gaining market share against PCs as well, why not pour on the coals?


Apple, it seems to me, has been about the business of inflicting increasing wounds on the PC market. The first salvo, of course, was when the iPad ushered in the Post-PC era in 2010.

The second salvo came when Apple introduced the awe-inspiring Mac Pro in 2013. If you recall the Steve Jobs analogy about PCs being trucks, Apple intends to be the last man standing when it comes to building trucks for customers who still need them. And awesome trucks at that.

The next round came when Apple introduced the latest MacBook Air in April with a lower price. "MacBook Air Gets Faster, Cheaper." Instead of adding the Retina display, which would have made the geeks happy, Apple passed on an expensive Retina display and found a way to lower the price. That put even more pressure on the faltering PC market.

And then today, Apple announced a new entry-level iMac that has most of the modern technologies: a dual-core i5, a 500 GB drive, 8 GB of RAM, and 802.11ac Wi-Fi, USB 3 and Thunderbolt. All wrapped in a drop-dead gorgeous 21.5-inch IPS display.

While it may seem that a little more money gets you a lot more computing power, my take is that there are a lot of Apple customers who, with iPhone in hand, go into a local Apple retail store and start drooling over this new beauty. Saving US$200 over a more powerful model is hard to resist when one can rationalize that ultimate computational power isn't really necessary for most of the tasks that this entry-level Mac is designed for.

Why not $999 to keep the number in triple digits? Kelly Guimont asked me that in the TMO Daily Observation Podcast for June 18. The answer, I think, is in the proper tiering and pricing of all of Apple's offerings. A $999 iMac would be out of sync with the perceived value of an entry level MacBook Air. So while miniaturization comes at a price, a much larger display on the iMac must be perceived to offset that a little. The bigger iMac should cost as much or more, even though it has the same motherboard as the MBA.

The Market Share Trend

How is Apple doing with this strategy of carving out a larger and larger piece of the PC market place? Horace Dediu shows the trend in "When Apple reached parity with Windows." The second major chart, excerpted below, shows that the ratio of PCs-sold to Macs-sold has continued to decline since 2004. The ratio in 2012 was about 19:1 and dropping, down from a high of 56:1 in 2004.

Image credit: Asymco.

Of course, Mr. Dediu's point is that if you add iPads and iPhones to Macs, the ratio drops to about 1.18:1 and is heading towards 1:1. Even so, so long as the iPhones and iPads are going to contribute greatly to Apple's revenues and total market share, why not pour on the coals and make life even more difficult for HP, Dell and Toshiba? (Lenovo seems less susceptible.)

In the end, this new iMac is a quality Mac. There's nothing cheap about an entry level iMac, and it doesn't diminish Apple's brand, as some might foolishly suggest. It will last just as long as its more powerful brethren, run Yosemite and beyond, and be a pleasing, beautiful, and well-crafted thing to own. The Intel Turbo boost to 2.7 GHz seals the deal.

It's like the BMW X1 and X3 SUVs. Of course, they're not in the class of the X5, but they're still BMWs — a pleasure to own. Also with turbos!

All in all, I am pleased to see Apple taking this approach: Offering the customer a quality iMac for a little less and bringing it more in reach, will make Apple's customers very happy while creating serious heartburn for the PC makers who see their market slowly slipping away.


Heartburn teaser via Shutterstock.