Covering the digital giants, by Jon Fortt
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October 14, 2008, 7:26 am

Will Steve Jobs outrun a bear?

Apple’s lineup of MacBooks is getting an update on October 14. Photo: Apple

You’ve probably heard the story of two guys walking in the woods who accidentally startle a hungry bear. As the bear turns to them, one laces up his running shoes. “Why bother? ” his friend says. “There’s no way we can outrun that bear.” With a wink, the man replies, “I don’t have to outrun the bear. I just have to outrun you.”

Ahead of what’s almost certain to be a dismal holiday season, this story takes on special meaning for Apple (AAPL). The bear market is poised to maul PC sales during the most important time of year, when about half of all annual sales happen. Investors clearly expect things to get ugly -– before Monday’s market rally, they had slashed Apple’s market value to half its year-ago level on fears that the credit crisis will ruin Apple’s Christmas.

But here’s the thing investors may be missing: Apple doesn’t have to outrun a bear market. It just has to outrun PC makers like Hewlett-Packard (HPQ) and Dell (DELL). And with a new line of laptops set to debut Tuesday, CEO Steve Jobs will argue that he’s already lacing up his running shoes.

Can Apple really rescue its holiday season? The idea may not be as far-fetched as it sounds. Even in bad years, consumers still buy computers; they just buy fewer of them. In the horrible fourth quarter of 2000, for example, consumer PC sales dropped 3 percent – painful, but not disastrous. Now, as then, the key for PC makers will be figuring out what features people really want, and offering them at a decent price. Back in 2000, Compaq had a strong holiday season because it correctly guessed that consumers would want CD burners built into their PCs. This year, consumers seem likely to be excited about laptops that are thin and lightweight yet affordable.

If thin and beautiful is in, that’s good news for Apple. Rumor has it that, thanks to new manufacturing methods, the latest crop of MacBook laptops will sport a smoother look practically unmarred by screws and seams. And analysts expect Apple will lower prices in a nod to tough economic times – entry-level MacBooks will cost as little as $800 or $900, nearly 20 percent less than the current prices.

The laptop price cuts are great, as long as Apple doesn’t take them too far. Part of the reason Apple has done so well lately is that it makes so much profit on every PC it sells – something like 25 cents on the dollar (competitors selling Microsoft (MSFT) Windows-based machines get less than half that). How does Apple do it? Apple doesn’t sell discount computers. Instead, Apple’s starter laptops are really mid-tier, weighing a trim 5 pounds and coming with goodies like Intel (INTC) Core 2 Duo processors and built-in webcams. When Apple tries to compete on price … well, things tend not to go so well. The Mac mini, the stripped-down $600 desktop computer, isn’t exactly a top seller.

“For Apple, it’s probably not a time to panic,” says Steve Baker, analyst at retail tracking firm NPD. “I certainly don’t see a reason that they need a very low-end notebook.”

So, it’s an open question whether the new designs will give Steve Jobs enough of an edge to avoid the bear, and outrun HP and Dell. But regardless, he shouldn’t cut its laptop prices too far -– because Apple doesn’t run well in cheap shoes.

Since mid October it seems as if there is less consumer confidence. With Bail outs and job losses, it seems as if this may be an even harder season than back in 2000.

Also, Apple hadn’t dropped its price to 800 or 900 for macbooks.

Any new conclusions? Will apple be able to rely on the Middle Class who is hurting right now?

Posted By Irving Muller, Kansas City, MO : November 22, 2008 10:08 am

Magnificently confirming the analogy of indirectly “outrunning the bear,” Gartner Group reported today that Apple’s share of the US market grew 29.4% in the 3rd quarter year-over-year, six times greater than the total growth of the US market, which is 4.6%. Therefore, it doesn’t matter much if the US market shrinks–Apple’s share of the pie is growing much faster than the pie is shrinking, so the guys who will get hurt are the runners-up.

Posted By Roger Knights, Seattle, WA : October 16, 2008 12:11 am

I am constantly amazed at peoples reactions to Apple whenever the unveil new products and updates. It seems as though many people simply react emotionally and forget to check out facts. I am not going to presume that I know all the facts. I can intelligently state that I support BOTH Windows and Macintosh computers, and that I strongly lean towards the Mac side in a toe-to-toe debate. Dollar-for-dollar and pound-for-pound, I firmly believe that Apple puts out the most consistent performers and at competitive prices. Apple is not selling computers, but an experience, period. Microsoft sells software and some hardware, and Dell, HP, et. al., sells hardware. None of them sell an experience. The total package. The irony here is that not everyone likes that…and THAT is what makes choice so awesome. For all you fine folks that want a CHEAP laptop that may be relevant for three or four years, go find the cheapest one out there, and six, seven, even eight years from now, when you are on your third or even fourth cheap laptop, I will STILL be using my MacBook from 2008.

smz…

Posted By Steve Z., Hershey, PA : October 15, 2008 12:59 pm

I used to work for Dell and I know how cheap they are made. I’ve recently purchased a Mac and love it. I will never buy a Dell again.

Posted By Kyle, Nashville, TN : October 15, 2008 3:21 am

Why would I buy a Mac? It runs more software than any Windows machine, it’s almost virus free, it’s far easier to use, the Safari browser actually conforms to web standards, and it’s about the same price when configured similarly to a Windows machine.

Oh yea, now I remember why I’d buy a Mac.

Posted By Kurt, Sterling Heights, MI : October 14, 2008 11:40 pm

Are you kidding me? The article reads “This year, consumers seem likely to be excited about laptops that are thin and lightweight yet affordable.”. It’s a bit of an insult to the consumer market to put out more overpriced macbooks and macbook pros when most of us don’t really have the money to buy them. Another push for consumers to live way beyond their means may not work this time around. This is what bothers me even more… “And analysts expect Apple will lower prices in a nod to tough economic times – entry-level MacBooks will cost as little as $800 or $900, nearly 20 percent less than the current prices.” Yeah, good luck on getting Apple to cut their profit margins. Why spend $1300 on a Macbook if one can get a Thinkpad T400 for $800-900? I think consumers will get excited about staring at a $2000 Macbook Pro on display and check it out at an Apple store. But honestly, I think this year (and holiday season) belongs to the netbooks – Acer One, Lenovo s10, Asus 1000, and MSI Winds, and listen Dell and HP’s are not winning here either. Myself, I’m getting a 6-cell battery MSI Wind for less than $500 and putting Leopard OS X on it, and will he very pleased with my a.k.a. Mac netbook. I spent 4 hours on my friend’s MSI wind macbook outside on campus and was sold. I’m more excited about this ultra-portable than I ever was about an Apple product. I am able to do everything I need to do with this netbook which is thin, lightweight, AND actually affordable. Or I could get a $399 Lenovo s10. For Xmas, I plan on gettting 2 more Atom CPU netbooks for my family members who need a cheap portable laptop. One could say I am cheating Apple by running Leopard OS X on a cheap and beautiful well-built MSI Wind that resembles a mini-white macbook. But it’s Apple who’s been cheating me all this time making me pay premium for components I could get at a half price. Honestly, I’m tired of getting ripped off. I think consumers are too… especially when articles like this keep reminding us how Apple “makes something like 25 cents on the dollar” for every computer it sells. I think Jobs is good at knowing what consumers want (or think they want), but not what they need.

Posted By Rob : October 14, 2008 11:31 pm

I’ve had my iMac for 3 yrs & it has been worth every penny. I went thru 4 PCs before switching to iMac & was constantly spending money for upgrades, virus protection, geek squad to come in & get rid of viruses that bypassed virus protection. I’ve had no serious problems w/ my iMac. Once in a while there might be a brain freeze which I can usually resolve w/out any tech support. I do not think I would ever buy a PC again. Especially not a cheap PC. There are always hidden unforeseen costs. As they say you get what you pay for & a cheap PC just gets you aggravation. W/ Mac you know exactly what it costs & what you’re getting & that you don’t have to worry about aggravation. Sure if I was a techy maybe I’d get a cheap PC because I could always fiddle w/ it but I am not a techy & it takes me 4 times as long to fiddle as it would a techy to fiddle so I am done w/ PCs since I do not have the time or inclination to waste huge amounts of time fiddling w/ a PC to get it to work, not usually correctly, but just to work at all.

Posted By LMurphy, Jersey City, NJ : October 14, 2008 4:55 pm

I purchased a 17″ Dell Studio 17″, 4GB, Core2, etc, etc, which is a briliant computer, Vista and all. Its sleek and more customizable than the Mac, including the color (I got blood red).

Vista has been out several years and is not the annoyance it is portrayed to be in the commercials. Mac is about image.

Posted By Chris, Annapolis, MD : October 14, 2008 4:54 pm

A more pungent way to phrase the opening is this:

“Apple doesn’t have to outrun the bear, it just has to outrun Ballmer.

Posted By Roger Knights, Seattle, WA : October 14, 2008 4:39 pm

“Great article, I love the opening.”

I agree ;)

Posted By Roger Knights, Seattle, WA : October 14, 2008 4:17 pm

Interesting to think that Apple just might consider lowering the price on the best laptop in the world. I’m a Mac user, always have been, always will be. However, even as I am reading your article, I am also reading on the Apple site that the price of the new MacBook 13″, the “bottom of the line” or entry level model is starting at $1299.00

If this is true, (their online store site is being updated so I can’t confirm price) I’m somewhat disappointed. I’m ready to purchase my very first laptop, and was hoping (after I read your article) that the price would be lower than the $1099.00 that I paid for my daughter’s MacBook 13″ back in March.

Sometimes, when Apple has upgraded a model in the past, it seemed like the consumer got more bang for their buck with the newer computer. For instance, way back, when I bought my first iMac – the graphite G3 line – a few months later, Apple upgraded the line and the cost remained the same as what I paid for mine!

I know the newer laptop is better equipped and worth every penny, but I was holding out hope that I may actually pay less for this one than the last one!

Posted By David Moschetta, Pittsburgh, PA : October 14, 2008 3:30 pm

I agree with the point made by Ernie. Dell makes fine computers, I own two of them. The problem is the Vista operating system. I switched back to my older Dell which still runs XP and will use it until I buy a MacBook. I am no longer willing to live with the frustration of Vista.

Posted By Barb, St. Paul, MN : October 14, 2008 2:48 pm

Steve has to realize that it’s not only about the design and looking fly at cafés. What really matters is the performance to price ratio…

Posted By John- San Antonio, Texas : October 14, 2008 1:14 pm

Apple enthusiasts are willing to pay more to get more. Apple’s products are slick and refined, compared to their clunky Windows counterparts. The lack of annoyances is certainly worth any extra bucks. Apple users don’t deal with viruses, don’t have the annoyance of repeated warnings from McAffee software, don’t get a list of options when they plug in a CD (it just appears on the desktop), don’t need dancing puppy dogs and paper clips, and have never dealt with spyware.

Posted By Shane, Sarasota, FL : October 14, 2008 12:34 pm

apple is running all right.
However, you have to count in a ression,how many people will pay $2000
for a $900 laptop that they can find in HP and DELL with same spec. yes, thinner and stylish, but only in good days can people afford the extra.
People will start using coupons and stuff in recession and looking for bargin rather than style.
And also, have you check with DELL and HP’s new line of more stylish computers? They ain’t ugly and heavy no more but still has the same low price. My M1330 is only 3 pounds and Lennovo has even lighter computer with more stuff build in to the computer instead of add-on with wires.
Yes, my computer fits in a brown envelope also just like the macbook air
but mine fit into a smaller envelope dude.

Posted By andyoo ,tx : October 14, 2008 12:33 pm

Some folks just don’t get it. Yes, I (we) realize that we can get more PC hardware for the money. No doubt. That’s why I have a quad core PC running some apps. But Apple isn’t just about the hardware.

As a recent convert to the Mac side…I can’t say enough about how wonderful the overall software environment is on the Apple machine. Tight integration….creativity unleashed. And the looks are smashing as well.

No, it’s not about the hardware…but about the software, lack of head aches, lack of lock ups, enhanced creativity, etc.

I wasn’t a believer until I tried one…

Posted By Mike, Stevens Point, WI : October 14, 2008 12:32 pm

the big problem with Dell PC(s) is called Windows Vista.

Posted By Ernie, Slidell, LA : October 14, 2008 12:28 pm

Just bought my college student a Mac Book to replace his old Sony. With discounts, it was 1200.00 including the MS OFFICE look-alike software which I thought very reasonable since I don’t have to add Norton utilities that are absolutely necessary for a PC. The Mac is much faster, virus free, and easy to use. I’m waiting for Tuesday and may pick up the new model. In the meantime, I’m holding my Apple stock.

Posted By Milo Fabian, Rochester Hills, MI : October 14, 2008 12:22 pm

“I recently bought Core2 Duo 2 Ghz 250GB HD, 4Gb mem, DVD burn, webcam, vista prem, 15.4″HD screen, 512MB ded graphics for 525 Dollars in 6 lb laptop. Go price an equivalent Macbook. Its well over 2 grand. Apple is doomed.”

Let me know how that is running in couple years. Its more than just the computer its the software too.

Posted By B , Fort Worth Texas : October 14, 2008 12:07 pm

Introducing new products before the shopping season is a good way to boost sales (hopefully they moved all their old inventory too). And if Apple introduces a sub $1000 laptop then they’ll be able to hang with the other PC makers come Christmas time since nearly all of them already offer laptops below that price line.

Posted By Tony – Boston, MA : October 14, 2008 11:45 am

Even in these bad years, I believe, people will still buy Apple’s computers, because we just can’t live without it now.

Posted By Julia Pereymer, New York, www.ecompetitors.com : October 14, 2008 11:41 am

Great article, I love the opening.

Posted By Joseph, Toronto Ontario Canada : October 14, 2008 11:29 am

So. What is the point of your article exactly? Take away the fluff and what are you saying that is worth the effort to write, or read? You’ve done better. Why lower standards?

Posted By Chano Glendale CA : October 14, 2008 11:01 am

A vast market for the $800 price target if it contains the good stuff the higher priced Apples go for. I think its a winner for those who dont have or want to spend much moola right now.

Posted By Joebridewell Benbrook,Tx : October 14, 2008 10:54 am

Reaching for my credit card, I can’t wait to get one of these new Apple notebooks. I will never go back to generic PC computers, they just don’t compare to the Mac. Mac is the real deal, Windows is just a bad, me-too knockoff.

Posted By Brian : October 14, 2008 10:42 am

Oh dear! Referencing analysts. Haven’t you learned your lesson. Do some real research instead blindly following the blind.

Posted By Mala, Nags, Aichi : October 14, 2008 10:17 am

I think Apple can manage an entry level laptop under $1000 without diminishing the brand. But it’s a thin line to walk.
What’s more important? The legions of college students who’ve adopted Macs as their preferred computer. In the beginning someone tells two friends, they tell two friends – and so on. The numbers are small for a few rounds. Then they become astronomical.
-Murphy Mac

Posted By Murphy, Charlotte, NC : October 14, 2008 8:37 am

I recently bought Core2 Duo 2 Ghz 250GB HD, 4Gb mem, DVD burn, webcam, vista prem, 15.4″HD screen, 512MB ded graphics for 525 Dollars in 6 lb laptop. Go price an equivalent Macbook. Its well over 2 grand. Apple is doomed.

Posted By Newport News,VA : October 14, 2008 8:30 am

You’re sadly mistaken if you think Apple will present a $900 notebook. Both AppleInsider and MacRumors confirmed that this new product will be a 24″ apple cinema display. There will be no el-cheapo computers from apple and thus the pipedream of outrunning the competition in a bear market wont come true this year.

Posted By Michael Joons, New York, NY : October 14, 2008 8:15 am
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Jon ForttA senior writer for Fortune, Jon Fortt focuses on technology and innovation in Silicon Valley - a subject he's been reporting on since his days as a rookie reporter for the Lexington (Ky.) Herald-Leader. Before joining Fortune in 2007, Jon had reporting and editing stints at Business 2.0 magazine, and the San Jose (Calif.) Mercury News, Silicon Valley's hometown newspaper.
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