Apple ships sub-$500 computer!



[ Bill Snyder is on vacation. David Strom is substituting until Bill’s return. ]

Things are good at Apple. iPods and iPhones are selling at something on the order of 100,000 units a day, they have new laptops that are less pricey but still sexy looking, and even Chairman Steve was on the analysts’ call this week for the first time in several years.

But one thing Jobs said really stuck in my craw. “We don’t know how to build a sub-$500 computer that is not a piece of junk and our DNA will not allow us to ship that.” Excuse me? I guess the sub-$500 computer that I purchased doesn’t count — namely, the iPhone.

OK, so maybe he was talking about bigger sub-$500 computers, like laptops or desktops. But my iPhone could be considered a laptop replacement. Sure, it’s a laptop that lacks the ability to cut and paste text or accommodate lengthy documents, and you can’t store or transfer files without installing an add-on application (or Briefcase). But it still does most of the work of a laptop. And then there are the enterprise iPhone fleet deployment issues to consider too. But let’s think about the concept of a sub-$500 PC for a moment.

If you go to TigerDirect.com or CDW, you can find more than 40 laptops for less than $500 currently on sale. Granted, some of them are running Linux or have 9-inch screens or are reconditioned or are from odd manufacturers (I didn’t know Sylvania made computers). But still, you can get a bare-bones HP with a 15-inch screen for that price, and a few Acer models too.

The field widens considerably if we consider desktops for under $500. In fact, I think the last couple of PCs that I bought were at that price point, and that was a few years ago. Granted, you aren’t going to get a gamer machine, or even a machine that will run Vista very well for that kind of cash. But a piece of junk? Hardly.

The more that I think about it, the more a sub-$500 PC makes sense for a standard corporate machine. First of all, you can practically expense the thing and not worry about it becoming obsolete. It’s obsolete the moment you buy it, so who cares? It’s still probably a better machine than anything you bought five years ago for $1,500. Most applications (other than Microsoft’s) don’t require a lot of horsepower these days. For those users who need more graphics oomph or multicore CPUs, you can make exceptions.

Second, given that your laptop may be confiscated by Homeland Security when you travel, you may not want to bring along all your data anyway, and just connect to it remotely.

Finally, small is beautiful, especially when you try to open up your laptop on a crowded plane and the person sitting next to you is supersized and the tray table is sticking in your belly. I’ve given up trying to use a laptop on a plane (unless there’s an empty seat next to me, which happens even less often than flights land on time these days). In cramped quarters, an iPhone does the job.

So Steve, what you should have said was: “We don’t know how to build a sub-$500 PC and still make $300 profit from it.” That’s really what’s going on in Apple’s DNA — and why the company is doing well while other PC makers, which have about as much margin as your local grocery store, aren’t.