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Why Apple doesn't make a netbook

Seb Janacek silicon.com | March 5, 2009 6:07 AM PST

Summary

The clamor for Apple to join the netbook market continues to increase from all sides. But are the low-cost portable devices a fit for Apple's product line?
As netbooks continue their inexorable rise up the wish lists of gadget hounds, businesses and ordinary folk alike, the clamor for Apple to join the market continues to increase from all sides.

That's despite both Steve Jobs and interim CEO Tim Cook categorically denying that Apple is about to enter what has been described as a 'nascent' market.

Jobs has also suggested that the iPod Touch and iPhone is in essence a kind of netbook, based on what they are commonly used for. He's not fooling anyone though.

Starting from essentially zero market penetration in late 2007, by the end of last year, roughly 10 million netbooks have shipped, according to IDC. They now account for seven per cent of all portable PCs, an extraordinary growth rate in a short time.

See also: Installing Mac OS X on a Dell Mini 9 netbook
New iMac and Mac Minis on the lab bench
Battle for best high-end Mac OS X netbook

So what defines a netbook?

Jobs may have a point in that the Touch is great for web browsing and email, is lightweight, has wireless and is relatively cheap.

It's not ideal for office or productivity tasks. I'm a fan of the soft keyboard and will happily 'tap' out a hundred words or so of an email but a longer document is painful.

But at what cost? It's a loaded question.

Firstly, as Jobs claimed late last year, Apple doesn't know how to make a $500 Mac that 'isn't a piece of junk', as it's not in the company's DNA. Consider the current Mac Mini. A mere $100 above the $500 price point and it looks overpriced, probably because it is.

Secondly, Apple would undoubtedly sell bucket loads of shiny units if it did release a sub $500 OS X-powered netbook.

However, given the company would be competing in an aggressive and increasingly populated market with price being the key differentiating factor, its margins would be cut and its profits would suffer. An anathema to the Apple board.

Furthermore, sales of netbooks would cannibalize sales of higher margin, higher specification MacBooks, again resulting in more loss of profit.

Lest we forget, Apple has somewhere in the order of $28bn in cash thanks to its aforementioned high profit margin strategy and is well placed to sit out tough economic times and come out smiling the other side without compromising the same strategy.

Appealing to a customer who focused solely on price makes no sense to Apple. Someone who cares solely about price has a casual interest in quality and that is another anathema to the Apple brand.

Perhaps the very best reason to explain why Apple isn't bothering with netbooks for the time being was illustrated in a report from retail analysts Channel Checkers.

The firm surveyed Apple stores to track sales of iPod and Macs along with business trends at Apple stores in the US. According to their survey, 73 per cent of respondents said the top-selling computer was the MacBook Pro.

The top selling Mac in most Apple Stores surveyed was the high end MacBook Pro. The highest specification notebook Apple produces. In the US it retails between $2,000 and $2,800. Hardly low-cost netbook territory.

As we stand there are two reasons Apple isn't selling netbooks.

Firstly, Apple doesn't make netbooks because it can't work out how to make a notebook that can compete in that $500 space.

Secondly and more importantly, Apple doesn't make a netbook because, right now, it doesn't need to.

This article was originally published on silicon.com.

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just make the macbook a netbook at the same price
JamaalUzziel 25th Jan 2010
you get what you pay for and i would pay (999-1300) for a netbook that worked and this would save the macbook line
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Netbook = cheap Apple = Overpriced
anthony_hunt 5th Mar 2009
A simple equation.
They can be a lot more expensive.
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Apple already has a netbook...
mrlinux 5th Mar 2009
And you are correct on price, it is called the MacBook AIR
with a 10-12 inch model based on Arm, and an 8 hour battery life.
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Apple does not equate overpriced
spotvin 5th Mar 2009
Anthony,
Although I am aware this is still believed by most
people, Apple products are not overpriced. Just
yesterday I was reading a price comparison on the
iMac and competing al in one computers from
Dell and HP. For equal products, the iMac was
cheaper than the competition.
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RE:Apple does not equate overpriced
richdave 5th Mar 2009
Over the expected life of the product, 3-5 yrs, apple is way overpriced if you want to keep it current. Simple arithmetic. But that is not the real disadvantage.
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I still run a G3...at $50
marcomar 7th Mar 2009
A G3 DV iMac running at 400MHz with 10.3 worth $50AU is still a very
useful tool to the person who wants to run email, MS Office, Safari,
Photos, simple video editing, et al. Purchased years ago it's well worth
it's price.

Does anyone have data on how long a Mac really hangs around before
being replaced?

I reckon Apple look at it this way. Make a profit on the sale because
the customer won't think about renewing the product within 5 years.

Does the corporate sector do the same? Probably not. They roll over
computers at least every three years? I'm not sure of the logic behind
that. But if I were a school and budgeted for new PCs I'd try and keep
then working longer than three years even though the warranty may
expire.
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Dunno about Macs
wolf_z 7th Mar 2009
But I've got a 10 year-old Dell running XP and still doing (a little) production work.

Most of the non-Vista machines in our company are coming up on 5 years old.

Tisn't just Macs that hang around... happy
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A foolish thought.
mjolnar@... 7th May 2009
I sold cars for around 20 years. People buy a Toyota or Honda because they think they will last forever. Because it will last (forever) they take very good care of it. When it comes to Ford or Chevy, the thought pattern is that they won't last, therefor why take care of it.

My son is in education and research, therefor he has a Mac Pro. When he 1st started college, we got him an older low mile Chevy Nova, the car lasted 2 years. He asked me to help him find another car. I got him a Chevy Prizm, 11,000 on it. He blew the engine in it within 3 years.

He wanted to get a different car, I told him it didn't matter what he got because it wouldn't last. He claimed if he had bought a Toyota that would never have happened. I had to explain to him that both of his cars had been Toyota Corollas. He didn't change oil or check anything out on it.

The moral is, he bought an import engine for that 99 Prizm, learned how to take care of it. It is now 10 years old, with over a 100,000 miles on the engine and no problems.

Macs last longer because people take care of their fine machine. If people would take care of their PC it would last as long.
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the other side
coffeeshark 5th Mar 2009
Yes, Apple has the money to wait out the economy.

But should it?

What percentage do netbooks have to take to make Apple
take notice? They're at 7% now, maybe 10% by the
fall, 15% by next year? At what point does Apple
completely lose a mature netbook market by not
participating?

Keep a higher-specced macbook at $1199 and drop a
netbook at $799. I think they could do it, and I
think they will if netbooks continue to grow market
share.
competition at 299. And, Apples ace in the hole is that they can use Arm, which costs them lest to manufacture, and gives better battery life. Look for them to tap Nvidia and have the best graphics at the same time.
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are you privy to the manufacturing and engineering costs?

Part of the argument from the Apple community is that the extra cost of Apple products is a direct result of the superior engineering and manufacturing of Apple products, which is reflected in the overall price.

Maybe Apple CANNOT make very good money below a certain point, and an ARM processor would not lower the overall cost in any significant way.
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not their margin
coffeeshark 5th Mar 2009
Not that many netbooks are going for $299, most
are more like $400. An Apple netbook at $599
isn't going to maintain their desired profit
margin, in my opinion.

Since they rethink most of the niches they go
into, they'll do the same for netbooks, and
that won't come cheap.

Even at $699-799, they'd still have a price
point that is substantially below the macbook
but still sets them above the cheap netbook
crowd. Which would seem to be Apple's spot.
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Money to finance itself
setatakahashi@... 5th Mar 2009
The netbook appeal is to use x86 and the low price.

Apple needs cash to keep OS X and R&D advancing. So they will never try to compete on price.
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Poor margins on netbooks.
Programmer1028 5th Mar 2009
Apple learned its margin lessons in the 90's. If they ship a netbook it will be as a premium product. There's not a lot of useful features that Apple can add to enhance the surfing experience though.
But, Apple can add some useful features. How about the best graphics, the longest battery life, the best styling, the best OS (OSX), and of course the Apple brand.
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Netbooks are supposed to be cheap as hell and under powered, as they're designed to be used in tandem with web services. Hence the "Net" in "Netbook" Graphics aren't part of the equation, and price certainly is.

If Apple decides to compete on features like graphics (and I don't see how you fit best graphics AND best battery life together; there's usually a trade-off involved) and not price in a price competitive market, they're really not competing at all and are creating something completely different.
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that's only half of it though
Day24 5th Mar 2009
Actually, though I agree with you on what netbooks are supposed to be used as, I believe you are forgetting something very important.
For a lot of people, me included, netbooks have a few huge advantages. They are very small, compared to regular notebooks. They can be easily put into your bag if you're a student, into a case if you're a travelling businessman, etc. They don't have to be the most powerful machines, as they're not used as your main machine (usually), but they are used on the road. So, they have to have long battery life.

I think that if Apple could come up with something that has the formfactor (small, ten inch screen) and great battery life (8 hours) combined with OSX and a relatively low pricepoint (for a macbook), let's say 700 to 800 dollars, I think they would have a winner. In fact, it might get some people who love the design of the macs, but who have never made the switch, finally switch, and then get an imac as their main home machine to work in tandem with their netbook. At least, that would be what would happen in my home.....
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More Likely...
Jkirk3279 6th Mar 2009
Apple may instead make a version of the Amazon Kindle.


If they make it paperback size, with a color screen, and capable of
running any app the iPhone can, I suspect the demand for an Apple
netbook will be mostly filled.

Just add a standard USB keyboard for typing purposes. Or maybe Apple
will pull a rabbit out of their hat and add a pull-out keyboard.

With the touch screen ability it will blow away the Kindle II.
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Why would I pay that kind of money
mjolnar@... 7th May 2009
I can already get those features, less the OS X, for 1/2 the price. Price is the main factor. If a Person is willing to spend $700 to $800, they will simply get a machine that will do more.

People will stop around $500 for a netbook, because more than that, you get into the capability factors. Mac will lose that factor in the low price competition.

How needs an operating system that will only work on a proprietary machine.
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Not really...
Eleutherios 7th Mar 2009
MissingMatter, I would argue that a good chunk of people don't buy netbooks because they are cheap but because they are light weight and easy to carry around. I'm one of these people. I used to have a small (12') Apple MacBook (G4) and I loved its form factor. If Apple would make a small laptop (aka netbook), I don't think the core Apple customers would really care about the price (the same way they don't really care about the price for other Apple products). In other words, I agree with many other posters that Apple's constituency is not after "cheap" stuff, they're after "cool" stuff, and Apple could very well build a cool netbook (or whatever you choose to call that thing).
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Then it would NOT be a Netbook,
GuidingLight 5th Mar 2009
so what is the argument?
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Apple's iPhone & iPod Touch ARE their "netbooks"
Mikael_z Updated - 6th Mar 2009
The netbooks are nothing but an attempt to reach those people
with extra thin wallets, but the iPhone and iPod Touch offer
basically the same and more being lightweight and just doing
the most important things like surfing the web and writing email, &c.

The difference is of course that the Apple alternative is much
more elegant as usual, and even more portable.
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Exactly!
theoxygenthief 6th Mar 2009
n/t
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Apple will NOT compete on price
aussieblnd@... 6th Mar 2009
it's not a matter of WON'T.
Apple CAN'T compete in that price range and they know it so it would be a waste of time and resources
call it a Netbook, in order to differentiate.

It will probably be an Arm chipset made by Nvidia, with the best graphics, and best battery life of any Netbook, and it will sell for $200 more than the competition, and people will be VERY happy to pay extra.

The ability to use Arm on a Netbook is Apple's Ace in the hole.
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I think you asked the question backwards. It should be
"Are Apple's production lines fit for a netbook?"

As the question suggests, probably not. Apple have
consistently utilitized inefficient production techniques
which raise their costs of production with no benefit
whatsoever in terms of performance or other objective
critieria.

In an open market, Apple probably would win the "Darwin
award" for hardware design...and then die.
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Have you heard of outsourcing??
DonnieBoy 5th Mar 2009
NT.
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Apple IS in an open market
rahbm 5th Mar 2009
Simple fact: Apple DOES operate in an open market; people can choose to
buy whatever computer they like.

Interestingly, Apple is now #2 in sales in the US. Hardly a Darwin Award
contender!
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Apple makes a netbook (Depends on definition of netbook)
it called the macbook AIR
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RE: Why Apple doesn't make a netbook
simon@... 5th Mar 2009
It's called an iPod touch. And aren't they coming out with a larger form factor version?
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Dell rep has given us Mini 9's...
Mike Cox 5th Mar 2009
I ORDERED my Dell rep to give me thousands of Mini 9's at about $50 each. I then had my rep send me secret bits of Windows 7 for Netbooks. I then ordered each employee to buy one of these for around $200 if they wanted to use Netbooks to connect to our network. I then launched another round of "Rotten to the Core" and as an example, had my rep run over an iPod Touch with his new BMW.
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Bless You
DannyO_0x98 5th Mar 2009
You are an inspiration. A beacon. An Olympian demi-god who outshines
the envious sun.

By the way, are you hiring?
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Tough Irony
Mikael_z 6th Mar 2009
"give me thousands of Mini 9's at about $50 each"

Yes, probably what these notebooks actually are worth.

"had my rep run over an iPod Touch with his new BMW"

He couldn't have done it with a Dodge, could he?
I agree, the iPod Touch (or iPhone) is a much better "netbook".

happy
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iPod Touch with a car. A truck or Steam Roller would be even better.

Does make get their marketing strategy from the same people that McDonald's does? I have noticed that Mac and McDonald's are kind of related. Also, everything at McDonald's is Mac something, while at Apple, it is i something. Good idea, copy a market leader. I just don't understand why they would copy a fast food giant, but they do really strange things at Apple. Remember when they took the name because it was the recording label for the Beatles, then tried to get away with using the logo as well.
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RE: Why Apple doesn't make a netbook
tmsmqwx Updated - 5th Mar 2009
Wow! For once a pundit seems to get it:

"Appealing to a customer who focused solely on price
makes no sense to Apple. Someone who cares solely about
price has a casual interest in quality and that is another
anathema to the Apple brand."

The fact that Apple chooses to compete in an area of
maximum profitability, and that they are sitting on almost
30 billion in cash means that they have no need to enter
the cutthroat, low-margin arena which is low end PC's. It
would only serve to devalue the brand while bringing
minimal benefits. A customer who bases his decisions
solely on price would not appreciate the "user experience"
which Apple works so hard to craft. Large numbers of
these individuals responding to the lure of a cheapy Mac
netbook would only serve to dilute the loyal customer base
upon which Apple depends to maintain its profits, while
introducing an entire new generation of Mac users to a
substandard product.

I don't understand why the so-called experts continue to
insist that Apple must play in this sandbox. Clearly they
don't have to, and clearly they've demonstrated that they won't.
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RE: Why Apple doesn't make a netbook
DannyO_0x98 5th Mar 2009
Regarding cannibalizing, to some degree the netbook
market is or isn't doing so already. If it is, the question for
Apple would be is it okay if someone else pockets the $25
bucks in per-unit profit.

I suspect that the netbooks are still selling to first adopters
and haven't made the jump to mainstream, yet. I think a
sign of that jump's imminence will be if Apple does enter
the market, but it can certainly happen without Apple's
assistance.

I will say this, if netbooks are truly disruptive, then it
suggests that the industry went too far in terms of putting
powerful multi-processor cpus and big screens into
notebooks and were adding features that the consumers
didn't really want or need. This conclusion doesn't really
make sense, and so I think netbooks will ultimately be a
niche market or bundled into specialized convergence
products.

Meanwhile, what's the fetish with what Apple isn't doing?
Why hasn't Apple made a game console, games are bigger
than movies and growing? Why hasn't Microsoft made a
phone? Why doesn't Dell make a digital musical player?
Sorry, my bad, they did and it didn't work out for them. I
heard over the weekend that motor scooters are selling
really well since gasoline jumped in price and the credit
crunch is disrupting car sales, so why doesn't GM make a
motor scooter? See how promising a time-waster this
could be?

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Aready happening
tmsmqwx 6th Mar 2009
The numbers are already showing that netbooks are eroding profits for mainstream PC makers. Not only that, but it's now getting to the point where they are becoming too cheap for MS to easily hide that Windows license fee in the cost.

It doesn't matter how large a percentage netbooks bite out of the PC market, it's not going to affect Apple, because a netbook customer would not have been in the market for a Mac anyway. It's like saying if Toyota decided to flood the market with Matrix subcompacts that Mercedes would have to respond.
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Seems to me, it would be a good way
formerbberrynowiphone 5th Mar 2009
to introduce Mac OS to a much larger audience who
might buy a higher powered mac for their next
computer. A shiny cool netbook from apple for #399
would sell like hotcakes and possible dominate the
netbook space. Mac OS would be everywhere...that
would be good for apple.
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Not Apple
mathcreative 6th Mar 2009
If apple wanted to be everywhere they could have licensed their OS. To
other computer manufacturers a long time ago. It probably won't have
gone well, but you get the picture. Apple likes the market that it's in, and
changing to netbooks might take the company out of that market.
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At $399
JonWayn 8th May 2009
it wouldnt be good for Apple at all. It would only serve to cut into their reserve
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RE: Why Apple doesn't make a netbook
OrlandoHatch 5th Mar 2009
It seems to me that if Apple was to approach this industry, it would do well to approach it not be via hardware, but rather via the NET portion of the Netbooks. That is, they could offer the "Apple experience" via a hybrid offering (OS independent iTunes, iWork, ??? with web/local capabilities) accessible via a Safari front end.

If they were to do this, they would still have a lock in on quality, rights management, experience, and the "non-mac" Apple platform (Safari, iTunes, Quicktime, etc.) would continue to grow in users and richness. Subscription fees for stored content and delivered applications would drive the profits.

Fun to speculate.
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its all about the user experience
mac_user_1992 5th Mar 2009
Apple won't build a "netbook" until they can get a good graphics card in
a unit at a reasonable pice. Apple's efforts have been focused on the GPU
and user experience. Without those features what is the big difference
between a windows box and a mac box.

Most netbooks run Windows xp, and rumors are that a slim version of
Windows 7 will be the os for future netbooks not the full blown version.



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Anyone notice...
CowLauncher 5th Mar 2009
ZDNet seems to have buried this article so it's impossible to
find if you hadn't noticed it for the hour or so it was on the
main pages?

Obama names D.C. CTO Kundra as federal CIO

I wonder if it is because Kundra is pro Mac and Google?
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And Audi and Daimler should...
TimmyB 5th Mar 2009
...sell cars that compete with India's Tata and China's BIN motor companies. Of course, they must be well-built, use the same German powertrain, etc., but they will sell for only $10k.

One of two things will be true: either it will be a piece of junk, not worthy of the nameplate, or it will be good enough to make people realize that they really don't need the more expensive model. How does either of these sound like a winner to them?

If Apple doesn't want to compete at that price, why are so many of you whining about it? Quality costs money! What's next? I know... let's complain that our local country club refuses to lower their price to the same level as the local municipal golf course! How dare they?!?
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Good analogy
mjolnar@... 7th May 2009
The country club analogy is a very good analogy, because I have always thought of Mac users as being snobbish. Watch a Mac user sit at a PC and wrinkle his nose at it. It doesn't matter that it has 2 or 3 times the power, a much better GUI card and tons of RAM.

The elite class has always reacted like that. It is beneath their dignity to use the same product as the masses. How would they be any different then the common scum if they did? They would rather pay more for less then be thought of as ordinary.
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open your eyes
Al_nyc 7th May 2009
Look at a Tata and then look at an Audi. It is obvious why one costs more than the other. Then drive the cars and it becomes even more obvious. You pay more for the Audi, but you get more. With Apple you just pay more. It's a poor value. This is becoming more obvious now that Apple has started using Intel CPUs.
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Poor Value?
Heathen89 7th May 2009
Taking the Audi Vs Tata comparison, if I have need a commuter vehicle and have a 10min drive to work, then the Tata is probably a better value. 20min in the car each day wouldn't justify the price increase of the Audi. Who needs the extra features and nicer ride if you don't spend much time in it.

Same goes with netbooks. If you just need something small and light to provide access to the Internet is a Macbook worth the 6-9x the price of a Netbook? Not likely. How many people do you think are using a Netbook as their only computing device? Probably not a high percentage.

Just because you pay more for something and it has a shiny Audi or Apple logo on it doesn't mean it is better value.

In fact, at pretty much any price point you can make an argument the PC is a better value than Apple, whether it comes with Microsoft or Linux...
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you get what you pay for and i would pay (999-1300) for a netbook that worked and this would save the macbook line

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