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Apple thinks flat, not fat with monitors

The style-mongering company quietly tells dealers that bulky tube monitors will be phased out as it switches to sleeker flat-panel monitors, say distribution sources.

Apple Computer may be best known for its "Think Different" advertising slogan, but to Mac enthusiasts the new catchphrase could soon be "Think Flat."

The Cupertino, Calif.-based company has been quietly telling dealers that bulky tube monitors will be phased out as it switches to sleeker flat-panel monitors, say distribution sources.

The Apple 17-inch cathode ray tube (CRT) monitor--the last model available of this type--is being retired as the company makes a transition to all liquid-crystal display (LCD), or flat-panel, monitors. Apple currently offers 15-inch and 22-inch LCD panels.

In many ways, say analysts, the move is reminiscent of other technological shifts led by Apple: the switch to computers without floppy drives, along with the inclusion of DVD drives, USB, FireWire, gigabit Ethernet and wireless networking. All are technologies made standard in the company's Macintosh computers, well ahead of PC makers.

But unlike these other innovations, analysts warn, the shift in monitors could mean a substantial price hike for customers buying new Macs. Much depends on how Apple prices its existing 15-inch LCD monitor and new 17-inch model rumored to be unveiled as early as next month. With LCD monitor prices in free fall and nearly half of Apple monitor buyers picking flat panels, the time may be right to dump CRTs, analysts said.

Apple has "good reason to switch to LCDs," said NPD Intelect analyst Stephen Baker. Nearly half of all the Apple monitors sold at stores are LCD models, which account for more than 70 percent of the company's retail display revenue, he said.

"Obviously, through Apple's own analysis of its sales, most of the customers are going for the LCDs," said Technology Business Research analyst Tim Deal.

Flat-panel monitor prices are falling fast, too, from an average of $939 to $694 from January to February, according to NPD Intelect. That makes the sleek displays more attractive than they were just one year ago, when many 15-inch models cost more than some of the fastest PCs.

And the price drops are accelerating, said IDC analyst Eric Haruki, who noted that some companies already offer $399 15-inch LCD monitors. "We will definitely see $350 prices by summer and below $800 for 17-inch flat panels."

That's a big drop from autumn, when many 15-inch displays topped $1,000 before a holiday plummet to $599 for low-end models.

With prices dropping so fast, "Now is a good time for Apple to move to flat-panel monitors," Haruki said.

Raising the bar--or the price?
But analysts warn that Apple's move carries risks and could be perceived as a price hike by some customers. The company must also round out its line of LCD monitors, which leaves a gaping hole between the 15-inch and 22-inch models.

Apple's 17-inch CRT, which offers viewable area of 16 inches, sells for $499. The 15-inch flat panel, known as the Apple Studio Display, costs $799. Buyers of the Mac monitor forced into getting the LCD model would have to pay $300 more for less viewable area and lower resolution--a maximum of 1,024 by 768 pixels, vs. 1,600 by 1,200 pixels for the 17-inch display.

"The net effect for users is that it's an increase in the price for Apple systems," said Guernsey Research analyst Chris LeTocq. "In today's competitive marketplace, that's an incredibly difficult thing to pull off."

The larger problem, said Haruki, is twofold: the price gulf between CRT and LCD monitors, and the influx of cheaper-quality, third-party flat-panel displays selling for hundreds less than Apple's flat-panel models of comparable size.

"Apple can't do this without a decrease in the display price," LeTocq concluded. "I would anticipate maybe a $200 price drop in the Studio Display price and the introduction of a 17-inch (LCD) display to pull this off."

Apple distribution sources report that at least one other Apple LCD monitor is expected in June or July, possibly 17 inches or 18 inches in size.

Apple spokeswoman Nathalie Welch would not discuss new monitor models or plans to abandon the CRT market.

Apple loyalty counts most
Mike McNeill, president of Apple dealer ClubMac, doesn't believe big LCD price cuts are necessary for Apple to remain competitive. One reason: the loyalty of Mac users to the Apple brand.

"Apple isn't going to drop the price just because the market does," he said. "They just don't have a ton of competition." Regarding sales "of all my LCD displays, Apple makes up about 95 percent," McNeill said.

Baker sees Apple making a bold business move. Apple can put its name on sleek LCD monitors, but cede the CRT market to others. "To some extent, Apple is saying they're only going to focus on some stuff where they think they can add value. Monitors are so commoditized, there's no value in that."

This makes sense to McNeill. "Apple-branded displays are my No. 1 sellers," he said. "But if you add up all my displays, Apple only makes up about 25 percent of my display business." Though Apple's position is strong, "we sell a lot of 22-inch glass displays from other vendors."

His conclusion: "Apple is offering what they can make money on. It's hard to make money on the (CRT) displays."

Still, Haruki isn't convinced LCD monitors deliver high enough resolution for the right price--and that could hurt Apple display sales.

"The performance aspect isn't enough for, say, people doing professional graphics design," he said. Apple's top-of-the-line LCD monitor "is a 1,600-by-1,024 display, and that costs around $3,000." A comparable CRT with higher resolution would cost two-thirds less, he noted.

Ultimately, Haruki believes Apple "must shave $1,000 off the 22-inch Cinema Display and at least $100 off the 15-inch display to be competitive."

McNeill noted that Apple does offer an unusually high-quality LCD monitor--digital vs. analog--for the price. This is particularly true of the 15-inch Studio Display, which is one of the few digital LCD monitors selling for as little as $799. The features, styling and Apple brand could be enough to keep the company's core fans buying, he said.

LeTocq also believes that Apple's July 1999 investment of $100 million in monitor maker Samsung is a major asset.

"They do have an investment in a panel provider and that means that they are assured of supply and an opportunity to be aggressive on pricing," he said.

No matter what else, the shift to all LCD monitors should woo Mac enthusiasts, Deal said.

"It's part of Apple's wanting to be at the forefront of technology innovation and the whole design thing," he said.