Why Apple Doesn’t Need a Netbook

Apple's earnings call is over and for what seems like the 100th straight quarter, Apple has outdone the Wall Street estimates significantly. By just about any measure, Apple has a very successful quarter.

We are in the middle of the worst recession in most of our lifetimes. It is cutting across all industries. Apple makes premium products that cost more than its competitors across the line. Apple's notebooks average about three times the cost of its PC counterpart. Apple's iPod MP3 players are often around $50 more expensive than its competitors. The iPhone, while priced fairly competitively against other high end smartphones, requires a very high end plan from AT&T domestically. In music, Apple usually charges more than Amazon for the same DRM-free song.

Microsoft is also in the middle of an advertising campaign pointing out that one can often find Windows machines at much lower price points.

For all intents and purposes, Apple should be floundering against the backdrop of a recession. People are spending less where they can. Netbooks are all of the rage among consumers.

Tim Cook today made no bones about it. Apple isn't making a netbook, at least in the classic sense. He said:

"When I look at netbooks, I see cramped keyboards, terrible software, junky hardware, very small screens. It's just not a good consumer experience and not something we would put the Mac brand on. It's a segment we would not choose to play in."

He later added:

"Apple plays in this [netbook] space with iPod touch and iPhone". He saved his most biting criticism for last, however: "I think it's a stretch to call it [netbooks] a personal computer."

I think that goes beyond the call of duty and into bashing a bit. I personally use an ASUS 1000HE and love it for around the house uses. He's right that the keyboard is cramped but it is otherwise a solid machine that I enjoy using.

But I see where Apple is going. No netbooks, loud and clear. They can't compete in this space.

Any why should they? Apple, after all, is a company which wants to create shareholder value like any other. If they sold a Netbook, they would have to price them below what are their target margins but above ASUS and other competitors. At the same time, the products would be sapping marketshare from the higher end MacBook and MacBook Air products. It is a no win for Apple.

If Apple is going to use those rumored 10-inch touch panels for something, it will be to enter a new market. I'd wager it will be more iPod than MacBook and will be unveiled during the iPod refresh in the Fall.

Also, another quick note: Tim Cook mentioned the pricing umbrella again in regards to the iPhone. Apple is wary of letting competitors enter this market on a lower price scale. Since this has been mentioned twice, I expect Apple to make a move to make the iPhone more affordable in June. Whether that is the upfront cost or the plan, I have no idea.

I think Apple would rather its iPhone line be more like its iPod line than its Mac line, where it controls 70% of the market instead of 8%.

So what can we take away from all of this? I think a Steve Jobs-less Apple is doing just fine on its current track and doesn't need to switch up strategies very soon. Mac sales are down much less than the overall market, which has also switched to ultra low cost/margin netbooks. Snow Leopard, due later this year, will help spur Mac sales. So will an improving economy, if one exists.

I don't expect to see any game-changer products at WWDC. We'll probably just see a mildly-improved/less costly new iPhone, some software updates and some minor laptop improvements. As per today's earnings call advice by Peter Oppenheimer, I don't expect to see Steve Jobs either.

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