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Apple tightens competition with new iBook

The company has often led other notebook manufacturers when it comes to design, but with its new iBook, it is also closing the gap with competitors in another area: price.

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Jobs cuts prices on iBooks
Steve Jobs, CEO, Apple
Apple Computer has often led other notebook manufacturers when it comes to design, but with its new iBook, the company is also closing the gap with competitors in another area: price.

A new iBook, announced Monday at the Macworld Expo in San Francisco--combined with price cuts and configuration upgrades on existing models--effectively puts the Cupertino, Calif.-based computer maker back into the mainstream of the competition in portables.

"Apple's a lot closer to being in the ballpark," said Matt Sargent, an analyst at ARS. "They are a couple of hundred dollars higher, which for them is pretty solid."

The new iBook comes with a 600MHz PowerPC G3 processor, a 14-inch screen, a 20GB hard drive, 256MB of memory, and a CD-rewritable/DVD drive for $1,799. Meanwhile, Apple added a CD-RW/DVD drive to its $1,499 iBook that features a 12.1-inch screen and a 600MHz processor. Apple also dropped the price of its entry-level model with a 500MHz processor by $100 to $1,199.

That's within striking distance of products from other manufacturers. Compaq Computer, for instance, sells a Presario 1720 with a 1GHz Intel Pentium III, a 14-inch screen, a 20GB hard drive, 256MB of memory, and a CD-RW/DVD drive for $1,599. Compaq, however, is offering a temporary $100 rebate on this product, bringing the notebook to $1,499.

Sony offers a Vaio notebook with a 1GHz Athlon chip from Advanced Micro Devices, a 15-inch screen, and the same hard drive, memory and optical drive for $1,699. It also sells a 900MHz Pentium III notebook with a 14-inch screen for $1,449. Like Apple, Sony tries to stylize its products and includes multimedia features such as FireWire ports.

At the bottom end, manufacturers such as Dell Computer are selling notebooks starting at $999.

Because Apple cannot always use the same processors, software and other components as the rest of the industry, its products are often more expensive than those from competitors. Apple also places heavy emphasis on industrial design, which can add costs. For example, a traditional iMac with a built-in CRT sold for $1,299, which is more expensive than many Pentium 4 PCs with faster processors, bigger monitors, and free printers.

Still, battery life can be longer on Apple notebooks because the PowerPC chip consumes less energy than those of its competitors.

Historically, Apple has been able to sell well when its products are within $100 to $200 of competitors' offerings. When the first iBooks came out in May, they were roughly competitive with products from Dell and Hewlett-Packard, among others. Apple's sales were also fairly healthy; in the third calendar quarter, the company shipped 250,000 iBooks.

Toward the end of 2001, however, the iBook was moving toward the competitive fringes. The price-performance gap between the iBook and the rest of the field was increasing. Apple was also the only company actively promoting 12-inch screens.

That changed Monday.

"There is more price parity now than in the past on the price points," said Alan Promisel, an analyst at IDC. "With the 14-inch screen and the recordable drives, Apple is right on target."

The new iBooks will also feature the latest Apple software, including the Mac OS X operating system and the digital-music application iTunes. Photo-editing software released Monday, known as iPhoto, will also come standard in iBooks.