Apple tax on the latest Mac gear: 40 percent

Posted by Christian Zibreg

Chicago (IL) - With a new
Mac Pro, Mac mini and iMac, Apple brought the entire Mac family
up to date with varying success. While Mac Pro clearly has the edge
over rivals, Mac mini falls behind somewhat. It is iMac that seems
mostly in sync in terms of price vs specs. In fact, the updated all-in-one
comes ahead of similar all-in-one systems from Dell and HP - both in
hardware specs and, surprisingly, price. On the other hand, Apple's
decision to keep its updated Mac mini in the above-$500 price range make
the miniature Mac desktop unpleasantly overpriced. That's what analysts
think at least, but most average users still flatly label Apple new gear
as way too overpriced, even with the hardware refresh across the line -- and still they're buying in record numbers.
Of course, it's your money and you're free to spend it at your will,
but the truth is the price you'll pay for the newest Mac
hardware is still just one side of the coin. That said, we pause to
reconsider the bigger picture by taking a closer look at both sides of
the Mac pricing coin.



 

The release
of new consumer and workstation Macs this Tuesday has once again
sparked the debate over whether or not Apple computers are overpriced as a
whole. While some commentators think Apple is ripping-off consumers who
would be better off building their own computers from off-the-shelf parts,
others warn that hardware alone is but a small part of the overall equation,
arguing that Macs carry many hidden benefits which offset the premium.
In truth, as always, it depends on your point of view and usually falls somewhere in the middle. Of course Apple gear is overpriced, and by a
large margin.

Mac mini still overpriced

This ComputerWorld report
cited IDC analyst Richard Shim who observes that despite hardware
refresh Apple's $599 Mac mini still costs up to 40 percent more than
comparably outfitted Windows PCs. Many have hoped, including many here at TGdaily, that Apple would shave at least $100 off the Mac mini price to
bring the system in the sub-$500 category -- but obviously that wasn't
meant to be.

"You
would think [Apple] would be a little more reactive," said IDC analyst
Richard
Shim. Indeed, $599 Mac mini costs 40 percent more than
Asustek's comparable $430 Nova P22 mini PC.


MAC MINI *IS* OVERPRICED
It's as if Apple would like its Mac mini to fail in the market, push would-be consumers towards its more pricey Mac desktops. Despite the long expected hardware refresh, Apple disappointed many who had planned to purchase the Mac mini with unchanged price. While users expected Mac mini to enter the sub-$500 territory, Apple instead kept it at the same $599 price point as before, locking many consumers out for $99.


iMac is not overpriced

While
the lack of any price drop on Mac minis come as a disappointment, Apple did
make its new iMacs more competitive by realigning the product matrix. The same $1,499 that previously bought an entry-level
20-inch iMac now gets an entry-level model in the 24-inch category. Oppenheimer analyst Yair Reiner labeled hardware bumps in new
Macs as "a positive surprise."


IMAC BEATS DELL AND HP ALL-IN-ONES, BOTH ON SPECS AND PRICE

Apple's all-in-one iMac packs better or comparable hardware while
coming in $100 to $150 cheaper compared to Dell and HP all-in-one
computers. On the low-end, rivals still come in slightly cheaper, but at the
expense of hardware specs.


Reiner pitted the new iMacs against
comparable all-in-ones from Dell and HP. He found out that the $1,499 24-inch iMac
packs a faster CPU, more RAM and better or comparable graphics while coming in
$100 to $250 cheaper than the comparably spec'ed $1599 Dell XPS One 24, and $1,749 HP TouchSmart IQ800t. While HP and Dell all-in-ones come slightly cheaper on the low-end, iMac handily beats them in terms of specs.

 
IMAC vs. DELL vs. HP:  MID-RANGE
Mid-range $1,499 iMac beats $1,599 Dell XPS One 24 and $1,749 HP TouchSmart IQ800t not only on price, but CPU and GPU as well, although it has an inch and a half smaller screen than HP's all-in-one system and lacks a TV tuner that can be fitted via third-party peripheral that costs up to $100.
(Source: Yair Reiner, Oppenheimer & Co.)


IMAC vs. DELL vs. HP:  LOW-RANGE

In the low-range, $1,199 iMac fares much better in terms of CPU and GPU speed, as well as the amount of memory, when compared to HP and Dell all-in-ones. While the low-range HP matches iMac's price, low-range Dell sells for $899, some $200 less.
(Source: Yair Reiner, Oppenheimer & Co.)



Read on the next page: Which iMac to buy? Go refurbished? Mac specs, those that equal or exceed PCs, The Apple tax, up to 40%...






Which iMac to buy? Go refurbished?

Critics point to the Primate Labs' Geekbench benchmark
of new iMac and Mac mini that reveals an updated CPU inside which contributes marginally to speed gains over the previous generation.
According to Geekbench, the CPU clock speed improvements add up to 5
percent increased performance in iMacs and up to 7 percent in Mac mini. The modest gain doesn't come as a surprise since new iMacs and Mac minis
are still based on the now two-years
old Intel Core 2 Duo mobile CPUs, with its faster FSB speed of 1,066 MHz (compared to previous 667 MHz) being somewhat offset by a reduction in L2 cache from 4 MB to 3 MB. The two Mac desktops won't deliver more substantial CPU speed gains until Intel's
Nehalem architecture becomes available in mobile chips later this summer.

Primate
Labs concluded by stating that "you might be better off getting a
discontinued (or refurbished)
previous generation Mac rather than one of the new Mac models,"
especially if you're shopping on a tight budget. Readers should note
that Geekbench
tests focus only on the speed of CPU and memory. It excludes other
important factors such as increased default memory, better disk speeds
and new Nvidia GPUs that deliver up to five times better graphics
performance. All these factors combined positively affect the overall
impression of speed in everyday work beyond modest computing gains delivered via tweaked CPU clock speeds.


NEW IMAC AND MAC MINI:  MODEST CPU SPEED GAINS
Primate Labs' Geekbench focuses on CPU and memory speeds alone, excluding hard drive speed and graphics which impact overall system speed. The CPU clock speed increases in new Mac mini and iMac contributes to modest 7% and 5% CPU performance gain respectively. While more power is better, at least one analyst suggests buying a refurbished Mac for now, choosing to upgrade after Nehalem products arrive.
(Source: Primate Labs)


Mac specs that equal those of PCs

All
Mac desktops and portables now run Intel's Core 2 Duo CPU in the range of 1.6 GHz to 3.06 GHz. They also come with at least 2 GB of memory standard,
with storage
options ranging from 120 GB to 1 TB HDD and 128 GB or 256 GB SSD upgrades for
portables. Graphics ranges from the integrated and discreet Nvidia
9400M and 9600
GPUs that are now absolute minimum in all systems, to the choice of
a more
powerful ATI Radeon HD 4850 or Nvidia GT130 upgrades (iMac) or ATI
Radeon HD 4870 (Mac Pro). These specs put new Mac portables and
desktops in line with today's average or mid-range Windows PCs, comparable in performance and arguably slightly more in price.

Mac specs that exceed PC specs

The latest $2,499 Mac Pro workstation puts Apple ahead of rivals Dell
and HP by bringing the first desktop to the market with yet-to-be-announced
Nehalem-based Intel Xeon CPU, which had some commentators shaking their head in disbelief. While Mac Pro competes with Gateway's FX6800-05 PC because both feature quad-core
2.93 GHz CPU, ATI Radeon HD 4870 GPU, 6 GB of
1,066 MHz DDR3 RAM and a 1 TB 7,200 RPM SATA hard drive, MacPro's technological advantage is offset by a $450 premium over the Gateway system.


MAC PRO:  AHEAD OF THE INDUSTRY
While Intel has yet to announce its next-generation Nehalem CPU, Apple was the first to market it in a real product -- the latest Mac Pro. While the powerful workstation beats down comparable PC systems in the hardware arena, it ends up about $500 more.


The Apple tax:  25 percent to 40 percent

Taking all of this into consideration, the new Macs are indeed comparable with PCs in terms of hardware, but not yet on price. Of course, the fact that Apple hardware is overpriced is all but new news. In-Stat analyst Ian Lao calculated that for every dollar spent on a PC,
users had to pay about $1.60 to get the similar Apple hardware -- a
whopping 60 percent premium.

While Lao's estimate is now several years
old and applied to Mac systems powered by PowerPC processors and
Apple's proprietary hardware, both he and Shim warn today that Apple's latest Intel-based Macs still cost between 25% and 40% more than
equally-spec'ed PC machines -- the estimate mostly echoed by other
analysts across the board. With that in mind, you'd be forgiven for
asking "So, why pay a premium for Apple?" in the first place.


Read on the next page:  Why pay a premium for Apple, Apple's vertical integration, Final thoughts...






So, why pay a premium for Apple?

While
this is hard to explain to someone who's used to picking off-the-shelve parts
and building his or her own PC for a few hundred dollars, Mac users who
switched from PCs have learned to appreciate the hidden benefits which justify the up-front premium. While the Mac hardware still carries hefty
surcharge for the Apple name, the fact is that all Macs come preloaded with OS X -- deemed as the best consumer operating system in the world. Mac users,
regardless of the reason, also enjoy nearly virus- and malware-free
computing. Even die-hard Windows PC fans know how beneficial this fact
alone is, saving both time and money spent on computer protection
against viruses and malware as anti-virus software can bring computer into jerky responses or even an occasional total halt.

In addition to OS X, every Mac
also comes preloaded with iLife, a stellar suite of digital lifestyle
applications designed to allow easy management of photos, videos,
music and websites, in an all-in-one, integrated fashion. While Windows users
now have Windows Life Essentials, a suite of applications and free
online services that let you do the same basic thing, there is still a world of
difference between these two offerings when it comes to its ease of use,
elegance and efficiency.

With all of this combined, the hardware, the
operating system and lifestyle applications that come on top of it,
"Macs just work" because Apple makes them all under one roof. "You can't
discount the
value of the Mac experience and the software,"
acknowledges IDC analyst
Richard Shim, adding that Apple should nevertheless take note of the
fact that the
market is getting "a lot more price aggressive."


OS X:  THE HEART OF THE MAC EXPERIENCE
Beyond hardware and the design, Mac OS X operating system and iLife suite of applications that come preloaded on every Mac are a big contributor to why many view the current premium paid for hardware as justified.


Apple's unique vertical integration

The vertically integrated strategy, with everything coming from Apple, has allowed the company to emerge ahead of the
industry in terms of simplicity, user interfaces, ease of use,
elegance, design and in many other areas -- giving it the "Macs just work" mantra. And while you could argue that Apple
is in a favorable position because it only has to account for the
hardware found in its Macs, while Microsoft's Windows has to account
for a much broader range of chips, peripherals and devices, this
doesn't change the fact that Macs are significantly easier and more
joyful to use, cost less to maintain and last longer for the user in the mid- to long-range timeframes, helping to offset a significant portion of the up-front premium paid
on hardware.

And last, but not the least: The design. Many lust
after Apple's products for their design aspects alone. Even the fiercest Apple
rivals acknowledge that Apple leads the industry in terms of design.
While the fact that Apple's computers are beautiful both inside
and out, it doesn't add much value to everyday computing beyond
aesthetics and the "it factor", which to many is very important. It surely doesn't hurt to own a piece of hardware that is
gorgeous to look at, in my opinion.


IT ALL "JUST WORKS"
Since Apple makes the hardware, the operating system and most applications which run on top of it, Macs deliver a unique integration that translates into ease of use. In other words, everything "just works" to the point where you actually enjoy working on a computer -- something few Vista users have experienced to date.


Final thoughts

All these factors
combined justify the premium paid for Apple gear, and
the vast majority of Apple customers, be they die-hard fanboys or Windows
switchers, also agree. Some Windows users are starting to see exactly
why Apple stuff comes with a hefty premium, a fact proved by the over 50
percent of Mac customers in Apple's brick-and-mortar retail stores who have never
owned a Mac before, and are switching to Apple from Microsoft and Windows.

Still, most people
who had never owned a Mac (or have not used one for an extensive period of time) view Apple's computers as a rip-off, and Apple's
elitist image and perceived behavior certainly adds to this overall
impression.


So, are Apple's systems really worth the premium? Is
the new Mac mini an overpriced piece of junk? Or is it the most affordable ticket
into that which is the wonderful world of Apple? And with the new iMac being cheaper than comparable all-in-ones from Dell and HP?
Would the new iMac make you consider switching over from the Windows world?

Share your thoughts with us in comments section.