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Apple's Secret Weapon To Influence Industry Pricing 407

Posted by timothy
from the but-that's-no-fair dept.
Hugh Pickens writes "Nick Wingfield writes in the NY Times that Apple's present pricing strategy is a big change from the 1990s, when consumers regarded Apple as a producer of overpriced tech baubles, unable to compete effectively with its Macintosh family of computers against the far cheaper Windows PCs. Now within the premium product categories where Apple is most at home, comparable devices often do no better than match or slightly undercut Apple's prices. 'They're not cheap, but I don't think they're viewed as high-priced anymore,' says Stewart Alsop. Winfield writes that Apple uses its growing manufacturing scale and logistics prowess to deliver Apple products at far more aggressive prices, which in turn gives it more power to influence pricing industrywide, and one of Apple's pricing secrets has been it's willingness to tap into its huge war chest — $82 billion in cash and marketable securities last quarter — to take big gambles by locking up supplies of parts for years."
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Apple's Secret Weapon To Influence Industry Pricing

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  • This isn't exactly true for computers, but it sure is true for tablets. I can easily find better and more capable computers for lesser price than Macs, but it's an another issue with tablets. The current Android tablets either have bad hardware, bad design, are buggy or uninteresting and have less apps and games available. The good Android-tablets cost the same or even more than an iPad. At least with iPad I know to get consistent quality and a huge app store. And I don't mind paying a little for the apps a
    • Windows 7? CentOS Linux?? I call bullshit on the "hanging with my girlfriend in bed" part. Never happened.
    • by Anonymous Coward

      The whole tablet phenomenon is a fad. It was basically created via media hype, and the willingness of many of Apple's customers to buy just about anything with an Apple logo on it.

      Despite millions upon millions being sold, very few people actually use tablets. Once the novelty wears off, it becomes obvious that they aren't practical at all. They take the worst of smart phones, without any of the benefits, and combine it with the worst of netbooks, without any of the benefits. Sure, the tablets look interest

      • by errandum (2014454) on Saturday November 05, 2011 @08:40AM (#37957388)

        For casual computing, and I mean real casual computing (check your e-mail, browse and maybe reading a book/watching movies), tablets are ideal. Even if you coach something, imagine instead of taking all your student files, the planning and even having the ability to take notes on a single device (instead of a file that weights 3x more).

        There is a market for tablets, some might even say it is the real personal computer for people that don't like computers (I don't agree with them, but I see the point).

      • Well, I guess now that Ken Olsen has weighed in, the rest of us can go home.
      • by mjeffers (61490)

        The whole tablet phenomenon is a fad.

        I actually thing in 20 years we'll look back at the customizable home PC as the fad. The idea that the average person is the one responsible for securing, maintaining and updating a computer was a pain worth dealing with when the benefits of having the tech was offset by the ability to do something new but as technology evolves the pain just isn't worth what you get out of it.

        PCs may survive in business where the flexibility they offer can be supported by IT departments

      • by jbplou (732414)

        How did you come to this conclusion? I can can goto Starbucks, restaurants, supermarkets, and youth sporting events and very commonly see a tablet somewhere. Generally it is the iPad rarely it is something else, if you want you could say tablets aren't useful, just iPads but that isn't true. You have your head in the sand, tablets are here until somebody thinks of something's better and it isn't a laptop.

        Here is a prediction by summer of 2012 if iPad 3 is out the total of all iPads plus kindle Fire will sur

      • by Eponymous Coward (6097) on Saturday November 05, 2011 @09:01AM (#37957518)

        Wow, rarely has there been a post that I disagree with more.

        Right now, the tablet market is iPad and people who have them, mostly love them. The iPad is wreaking havoc on the low end PC market and they are still selling more iPads quarter after quarter. Apple is rumored to be dumping part of their desktop line up. There's no indication that the tablet line up is going anywhere.

        after you buy one and try to use it you find that you're better off using your smart phone or your netbook

        If this were true, I think you would be seeing a resurgence in netbook sales. The reality is that sales are way down and are stagnant. I think a lot of Slashdotters are really out of touch with how normal people use computers.

        There are many other tablets out there that are technically equivalent or superior to Apple's tablets, but nobody wants to use them

        Technically equivalent or superior? You must be measuring by clock cycle or memory size. I don't know of any tablet that even comes close to the iPad in areas that matter like build quality, battery life, and software. Apple has figured out that saying no to a feature is a bolder move than adding yet another switch or option and their product is subjectively better for it.

        Contrast this to the uptake of useful devices like PCs, laptops, netbooks, PDAs and smart phones. People actually wanted to use these ... these devices have had staying power

        How's that PDA working for you? Netbook sales are way down from their peak and not recovering. And who wants to use their PC? That's their work machine. The iPad is their play machine.

        Talk to people who compete in the low end PC market. The iPad has them terrified. It's a huge part of what spurred Apotheker to conclude that the PC business is dead. And have you seen Windows 8? That has me thinking that Microsoft is also turning away from the desktop market. It almost seems like they are splitting Windows into server and tablet versions.

        • by rocketPack (1255456) on Saturday November 05, 2011 @11:27AM (#37958594)

          I concur with what you're saying, and I have a couple of points to add:

          • Manufacturer support for a given form factor is a huge decision-making factor! Nobody wants to buy into a platform and see it dropped the next month. I would argue that Netbooks were the fad, NOT tablets. I never felt like Netbooks were here to stay, but I get the impression that the current generation of tablets are.
          • I believe that one reason people jump on any given bandwagon the moment that Apple gets on is related to my first point. Apple doesn't commit to designing and selling one-off products for short runs. They don't "test" the waters, they jump in head first. If they hit the bottom (MacBook Air) then they cut their losses and move on (iPad), but I think people feel something along the lines of: "OK, Apple is investing in this [form factor/technology/concept], so if I buy one too - whether or not it's Apple's - it won't be obsolete next week." Look at the iPod. Not the first MP3 player by a long shot. But since the iPod, almost every MP3 player has attempted to replicate the form factor and functionality. I know people with 5+ year old iPods. They still work, they still use them, and they still LOOK relevant in today's world. They are to the '00s and '10s what Sony was to the '80s and '90s.
          • If the iPad, Kindle Fire, Nook Tablet, Motorola Xoom, etc. are apples [no pun intended], then things like the HP Elitebook, Acer Iconica, etc. are oranges. For that matter, Netbooks are bananas. There is NO appropriate, fair, or accurate comparison.
          • Is an iPad wonderful for running the numbers on your latest contract and conducting a cost/benefit analysis? No, it's horrible. Is a Kindle Fire the best place to code your latest FPS? God awful is what it is (for that). What a more wonderful place to relax and enjoy some casual computing than in an environment where it's completely impractical (if not impossible) to be distracted by work? I think people are trying to tell computer manufacturers: we get it, computers can do a lot, but I don't want every device I own to be capable of doing any computing task! I want work-life separation.

          I feel like I've made my point, though I could go on. In the interest of full disclosure, I don't own a tablet (by any definition, or a Netbook). I have used them, I have talked to people who live with them every day. They don't work for me and what I do.

      • Sure, the tablets look interesting, but after you buy one and try to use it you find that you're better off using your smart phone or your netbook.

        And which tablet did you buy, that you speak with such authority? Given the smack talk elsewhere in your post it obviously wasn't an iPad.

        The fact that there's basically no real demand for tablets is exactly why no other company besides Apple has been able to produce a successful competitor.

        The Occam's razor answer is that no other company besides Apple produces a good tablet. Your apparent dissatisfaction with the non-iPad tablet you bought only underlines that.

        The tablet fad will likely be over by the summer of 2012, if not completely by early 2013.

        Oh really? And how long did you give the iPod fad and the iPhone fad? How wrong were you?

      • by Kenshin (43036)

        One really good use I've found for a tablet is to be able to load it up full of PDFs with manuals, schematics, etc. that we need for service calls. All the details of every machine we need to work on in a small form factor, easy to load up and search through. You don't have to lug around a laptop, this is a more natural reference form factor, and you don't have to call back to the office anymore and say "can you look this up for me?"

      • You, sir, with your complete misunderstanding and misinterpretation of the market, sound like you could be the next CEO of HP. Congratulations, and have a happy bankruptcy.
      • Re: (Score:3, Interesting)

        by Taty'sEyes (2373326)
        I thought this too, until I spent some time in the airport people watching. I was flying to Ukraine and I sat next to a gaggle of older women (late 40's, early 50's) and two of them had ipads. The other four women could not stop commenting on how they had to have one because these other two where able to show their photos and emails from their beaus, and maps and information relating to the company this woman's son was considering an offer from. And then photos of him and his awards and newspaper articles a
      • by radish (98371)

        Bullshit.

        I'm not an Apple fanboy (I sold my only Mac a long time ago, resisted the iPod until the competition went bust and have a general dislike for OSX) but I do have an iPad, which I use every day. Multiple times. In fact I use it more frequently than my main desktop PC (although not for as long at a time).

        For quick 5 minute web lookups, playing a game, checking twitter, etc it's perfect. I know my wife also wouldn't part with hers. If I had to pick between an iPad and a PC I'd go with the PC for sure,

    • by sqldr (838964)

      find a laptop with a WUXGA screen... which isn't a macbook pro..

      • by Kharny (239931)

        Find me a laptop that has a big enough screen where that actually matters, at all?

    • by hairyfeet (841228)

      Its being on the bleeding edge. Sure computers chips are for the most part commodity priced now, but if you set out to build a machine ONLY with the most bleeding edge parts, like say the absolute most powerful chips made? You'll find that savings goes poof because you are on the bleeding edge.

      This is where Apple has the advantage in the tablet market that they simply don't have in the PC market. you look at the Mac lineup and frankly i can't think of a time the Mac has been "bleeding edge' with regards to

    • For what it's worth, the 13" Macbook Pro is fairly competitive with a Thinkpad X1 when you up the RAM to 8GB and go with an i5 on the Thinkpad.
  • by Hadlock (143607) on Saturday November 05, 2011 @07:32AM (#37956994) Homepage Journal

    to take big gambles by locking up supplies of parts for years

    I've heard that the reason you see so few 9.5" "ipad size" tablet displays is that Apple bought up the entire stock. This is also why the iPad 2 had the same resolution as the ipad 1, and why the Android tablets are mostly stuck at 7". Can anyone confirm/deny this? Or explain that better. My knowledge of LCD manufacturing plants and capability is minimal, to say the least.

    • I can only guess, but I note that it's next to impossible to get a WUXGA laptop other than a Macbook Pro now. Dell used to sell them, but they withdrew that feature - replaced it on their high-end line with a lower resolution screen. I would not be at all surprised if Apple had simply purchased the entire supply of WUXGA panels, given that it's a niche part - only the most expensive laptops ever used them, and it seems plausable that Apple's demand for the 17" macbook pro could be great enough that Dell was
    • by Rockoon (1252108) on Saturday November 05, 2011 @07:37AM (#37957018)
      There is also the theory that 7" is a better size than 9.5" for this market. Beyond a certain size bigger is certainly better, but I dont think this market is in that zone. People want something that they can hold comfortably in one hand for a long period of time.
      • Re: (Score:3, Insightful)

        by jimicus (737525)

        There is also the theory that 7" is a better size than 9.5" for this market.

        Call me cynical but that sounds like a theory borne out of sour grapes to me.

        • Actually, I upgraded my 10" Touchpad to a 7" Nook, and I'm much happier with it. The 7" Nook
          - fits in a single hand,
          - and in my man-purse.
          - It's also a lot lighter and easier to hold in bed, while walking...
          - and can charge from a PC USB port, without a dedicated charger.
          - all the rest feels the same: videos, mail, rss, ereading. I know the 10" is much bigger, but it's not noticeable for those uses.

          The screen still allows me to read comics and web page without zooming, though only in scroll-heavy landscape

        • by Rockoon (1252108)
          Well they certainly arent my sour grapes.

          The "mobile" stuff I own are a prepaid flip phone from Motorola, and an iPod Nano 3G. Nothing touch screen and no "smart" devices at all.

          But if I were to get one of these mobile devices, I would definitely not be teetering on the "almost too big to be considered mobile" edge like the iPad is.
      • There is also the theory that 7" is a better size than 9.5" for this market.

        There was once also the theory that the world was flat. Thankfully, theories often turn out to be wrong.

      • I really like the 7" tablet size for portability, however, the form factor of the iPad is perfect for usability. A widescreen aspect ratio is nice for watching movies but the aspect ratio of the iPad is better for reading, browsing, and so forth.
      • by BasilBrush (643681) on Saturday November 05, 2011 @09:36AM (#37957744)

        There is also the theory that 7" is a better size than 9.5" for this market. Beyond a certain size bigger is certainly better, but I dont think this market is in that zone. People want something that they can hold comfortably in one hand for a long period of time.

        Smartphones already fill the "comfortable to hold in one hand for a long period of time" market. Tablets are a different market. A 7" is a compromise between tablet and phone, not being ideal for either.

      • by aiken_d (127097) <brooks AT tangentry DOT com> on Saturday November 05, 2011 @02:01PM (#37959850) Homepage

        Wow, if only Apple had done some market research and prototyping, they would have picked the 7" size and wouldn't have seen the iPad get trounced by companies who picked the better form factor.

    • What is a certainty is that Apple does volume buying at a scale nobody else can or is willing to match. It is a huge gamble for Apple. They got a lot of money but it is still a publicly traded company so if they screw up they can loose their value really quickly.

      You said it yourself, the iPad2 is very conspicious in the its screen usage. Maybe they bought a little bit to many? Remember HP and the dump of its tablet? That wasn't just done to upset the market. Grinding up old stock is costly in itself. If sa

      • You said it yourself, the iPad2 is very conspicious in the its screen usage. Maybe they bought a little bit to many?

        iPhone, iPhone 3G and iPhone 3GS all used the same size and DPI screens. Then the iPhone 4 doubled the DPI. 3 years before a change.

        Apple released the iPad 2 eleven months after the iPad 1. Why on earth would you expect it to have a different size or DPI?

      • Apple is also making a LOT of enemies.

        Lets see now. Consumers love Apple. Media companies, Carriers, OEMs. They all want to work with Apple. Developers are flocking to Apple. ( http://www.tiobe.com/index.php/paperinfo/tpci/Objective-C.html [tiobe.com])

        Who are these enemies you speak of? Competitors and freetards on Slashdot. That's about it.

        MS did the same once and those who thought that in business their is no room for hard feelings and rancor were ignoring moves by old MS rivals that didn't benefit the rivals as much as screw MS over.

        MS hasn't been coasting for the last decade because it has enemies. It's because because it's only managed to be successful in one new market since they established the Windows and Office monopolies in the 1990s. Tha

      • by thesandtiger (819476) on Saturday November 05, 2011 @12:00PM (#37958906)

        The strategy is pretty sound if you make a few assumptions:

        - Most manufacturers of components want Apple's business because they know it's *safe* and reasonably profitable

        - Most manufacturers of these kinds of components are willing to share with Apple (and their other big customers) what kinds of things are coming down the pipeline in the next 1-2-3 years

        - There won't be something that appears out of nowhere that's mindbogglingly amazing and ready to be manufactured without at least some advance notice.

        - Apple has enough cash on hand, brand cachet, and momentum that if they were to release something that was "good but not insanely great" they could survive it relatively unscathed (as long as they didn't keep doing that) because people would still buy it.

        These assumptions seem pretty reasonable to me. The Apple strategy also protects them against things like the quake + tsunami in Japan, the flooding of Thailand, and other issues that will come up and force competitors to raise prices.

    • The iPad 2 has the same resolution as the iPad 1 because iPad apps are designed for a fixed resolution and DPI. The resolution will only change when it's feasible to double it, as then all the apps will still work fine without scaling.

      That's exactly the same as happened with the iPhone.

      Android gives few guarantees as to resolution and DPI. Manufacturers can do what they like. Developers have to cope with that by scaling and/or stretching and/or relaying out their app UIs.

      The Android approach gives a greater

  • by Lazy Jones (8403) on Saturday November 05, 2011 @07:50AM (#37957074) Homepage Journal
    as a non-native speaker, I find it painful to read "it's" instead of "its" in almost every /. post ...
    • by SeaFox (739806)

      It's even more amusing when the correct form was used two lines higher in the summary.

    • by znerk (1162519)

      As a native speaker, I also find the inappropriate usage of its/it's painful.

      They're/their/there and your/you're are also sources of unreasoning rage.

      The affect vs effect issue was apparently enough to make someone make an entire domain [affectvseffect.org] about it.

      Language is a funny thing. "Funny" as in, you have to laugh, or it'll make you cry.

      • by Lazy Jones (8403)

        Language is a funny thing. "Funny" as in, you have to laugh, or it'll make you cry.

        I am a firm believer in the theory that spelling/grammar skills of readers are more strongly influenced by such casually read texts than one would think. The "it's" vs. "its" problem is a real epidemic, especially among people with IT background/interests (coincidence?). So we have to fight it aggressively, even though it gets boring to post 'it's "its", not "it's"' every time this happens.

      • The affect vs effect issue was apparently enough to make someone make an entire domain [affectvseffect.org] about it.

        Sadly that site gets it very wrong. It claims that "affect" is a verb whereas "effect" is a noun. In reality, there is also a noun "affect", mostly used in psychology (love/hate, joy/sorrow, wonder/desire are affects), and there is also the verb "effect" with the meaning "cause something to happen".

        Example: The good news effected an affect of joy.

    • by BasilBrush (643681) on Saturday November 05, 2011 @10:10AM (#37958036)

      Yet you don't find the lack of capital letters at the beginning of sentences to be a problem. If you're going to be a grammar nazi, it's probably a good idea to use correct grammar yourself.

  • Gambling (Score:5, Insightful)

    by whisper_jeff (680366) on Saturday November 05, 2011 @07:50AM (#37957076)
    People who view Apple's decisions as "big gambles" simply are not giving Apple the credit they deserve. Quite frankly, Apple hasn't gambled in quite a while - they are making very smart, very well thought out decisions and they are executing those decisions with skill and refinement. That isn't a gamble.

    Regardless of what you think of Apple - love 'em or hate 'em - it's simply inaccurate to describe their moves as "big gambles". They are making bold business decisions.

    Now, admittedly, that doesn't sound impressive but it actually is - too few companies are able to come up with a well thought out plan and to boldly follow it, sadly...
    • by znerk (1162519)

      On the other hand, every time Steve Jobs has left Apple, they've tanked until he came back... and this time, they can beg and plead all they want and he won't be able to take the helm again.

      • Re:Gambling (Score:5, Funny)

        by SydShamino (547793) on Saturday November 05, 2011 @11:14AM (#37958488)

        On the other other hand, if he does come back again and take control of Apple, I suspect their success will skyrocket....

      • by BitZtream (692029)

        'Every time' was that one time.

        Second, Tim Cook was brought in with Steve when he came back and its likely that Tim Cook was Steve's right hand man till the day he died for a reason.

        I agree, Steve WAS the driving factor, but Tim Cook deserves his spot to shine, this is the go who Steve said 'go do this' and Tim Cook made it happen. Not sure if he'll be as good at his new roll in Steve's spot, but Tim Cook is a BIG reason why Apple is where it is today.

    • by sqldr (838964)

      it's not really gambling when you've got 89 billion to spare. I'm sure any company would like to enter into similar antitrust practices if they had 89 billion.

  • Apple isn't leveraging anything. They are competing and setting the price where appropriate for the market, and as high as they possibly can.

    - In the mobile phone market where users switch brands as they please with disposable products that last maybe 1-2 years under contract they price quite aggressively. The iPhone really is a good deal. It also needs to be. With a large number of other smart phones on the market that also present excellent value the iPhone no longer has the unique benefits it did when it

    • by curmi (205804) on Saturday November 05, 2011 @08:17AM (#37957236)

      Not sure that is a fair comparison given that Dell laptop is reported to have poor build quality, poor battery life (some people report 2 hours), a poor quality screen, and I'm not even sure Dell sell it anymore. Also, the Apple laptop in question has Thunderbolt, backlit keyboard, firewire 800, 7 hour battery, solid aluminium (not plastic) and magsafe power connector. Not to mention a better operating system. It is clearly a better designed and engineered machine than the Dell.

      You'll always find laptops that are cheaper than Apple. But you get what you pay for.

    • by lazybeam (162300)

      Interestingly the Dell 13" version of your example is the same price, with lesser specs (notably, i3).

      But AFAIK the Inspiron is Dell's "cheap" brand. Apple don't do cheap. So you might be better off comparing with Alienware or Latitude. Both of which cost more than a similar spec MBP.

      Apple (and most companies) do rip off us Aussies, but remember that in the USA prices are advertised without tax, so you have to add 10% GST. Still higher, but not the full $200. One thing that really annoys me is they charge u

    • Only recently have they started getting cheaper, but not by much. Those that are noticeably cheaper are also of noticeably worse quality.

  • This business of locking up the supply of parts ought to pique the interest of antitrust regulators (if any still exist.)

    • by jbplou (732414)

      It would be hard to creat an anti-trust case when there are many other large companies bringing similar products to the table that consumers could buy.

  • by TimHunter (174406) on Saturday November 05, 2011 @09:08AM (#37957562)

    Here's a leaked excerpt from the next edition of Walt Mossberg's Wall Street Journal column, where he reports on a recent interview with Tim Cook, Apple's newly ascended CEO:

    I asked Cook what he thought his biggest challenges were. "Clearly," he replied, "China is our next big challenge. After the U.S. it's our second-largest market. But we're doing well there. We have 6 Apple Stores in China now."

    And after China? "Our biggest challenge in the U.S. is the Slashdot market," he said without hesitation. "We haven't executed successfully in that market. But it's a big market, vital to our success, and we're going to aggressively pursue it. I've asked Phil (Phil Schiller, Apples Senior VP of Worldwide Product Marketing) to sit down with John Frazier and figure out a way to get our products onto the ThinkGeek web site."

    Cook can't explain why the Slashdot crowd won't buy Apple products. "I don't understand it. OS X is based on Unix. We've been big contributors to the open source movement. But they persist in calling our customers 'Appletards' and 'fanbois.'"

    Cook is normally a low-key guy, but the more he thought about all the lost Slashdot sales the more agitated he got. "I want the Slashdot market. I will have it. Once I have the Slashdotters, the world will be mine! MINE I TELL YOU!"

    At this point I had to terminate the interview.

  • Secret weapon? (Score:5, Insightful)

    by hey! (33014) on Saturday November 05, 2011 @10:11AM (#37958048) Homepage Journal

    So their 'secret weapon' is that they think ahead, price aggressively in shrewdly chosen market segments, and take carefully measured strategic risks with their resources?

    Does it strike anyone as ironic that it's so unusual for a company to act the way a capitalist company is *supposed* to act that it's called a 'secret weapon'?

    • Re:Secret weapon? (Score:4, Interesting)

      by bennomatic (691188) on Saturday November 05, 2011 @03:50PM (#37960552) Homepage
      Don't forget their other secret weapon: design products that people want to buy, with a focus on the consumer rather than channel partners who tend to make short-sighted decisions which hurt everyone in the chain.
    • Does it strike anyone as ironic that it's so unusual for a company to act the way a capitalist company is *supposed* to act that it's called a 'secret weapon'?

      Wait, thought that involved making bad business decisions, giving everybody huge bonuses and then going to the government for a hand-out?

With all the fancy scientists in the world, why can't they just once build a nuclear balm?

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