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A new iMac for under $500?

The annual exercise of the Mac faithful--guessing what Apple will release at MacWorld--has prompted rumors of a lower-priced desktop.

Robert Lemos Staff Writer, CNET News.com
Robert Lemos
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Robert Lemos
3 min read
The annual exercise of the Mac faithful--guessing the products Apple Computer plans to announce at MacWorld--has some Web sites predicting the release of a sub-$500 desktop aimed at new users.

Two Mac-focused sites--Think Secret and Apple Insider--reported on the possible release of a low-end Apple PC this week, citing unnamed sources. The rumored $499 Mac will have no monitor, 256MB of RAM, a 1.25GHz PowerPC G4 processor and a hard drive with storage capacity between 40GB and 80GB, according to the reports.

These details, while concrete, have not been confirmed by Apple. However, the strategy itself sounds sensible, said Gene Munster, a senior research analyst with investment firm Piper Jaffrey. Apple has garnered incredible shopping traffic through its stores but has not had great luck in turning browsers into buyers, he said.

"It is not out of the question that they do something like this," Munster said on Friday. "The problem this would solve is that the good traffic through the stores could be converted into new Mac users."

Munster believes that such a move could build additional momentum behind the so-called iPod halo effect. This theory suggests that the success of Apple's music player can attract customers to other products made by the same company. A Macintosh priced at $499 could convince Windows users and new computer buyers to make the switch, he said.

Apple could not be immediately reached for comment.

The Cupertino, Calif.-based Mac maker commands the lion's share of the hard drive-based music player market, even though it did not pioneer the segment. In the U.S. retail market, the iPod accounted for more than 80 percent of sales in the 12 months ended this October, according to research firm The NPD Group. That's up from about a two-thirds market share in the same period a year ago and a 40 percent share in its first year.

Converting some of that market share into a boost for Apple's anemic single-digit PC market share is a powerful incentive to building a lower-priced Mac, Piper Jaffray's Munster said.

"The Mac has always been considered a premium-priced product," he said.

The rumors of a new Mac follow the pattern of speculation that precede the annual MacWorld San Francisco Conference, the next edition of which is set to start Jan. 10. Before the 2004 event, rumors focused on the possible release of a $100 iPod music player. Those predictions turned out to be false; the company released its iPod Mini music player at a price of $249.

This year, some Web sites have been betting on the release of a flash memory-based iPod music player. Some analysts believe that suggestion to be solid and have predicted themselves that Apple will sell millions of flash iPods in short order.

Bear Stearns analyst Andy Neff said earlier this month that Apple could sell 6 million units in the current fiscal year, which ends in October 2005, and 13.5 million the following year, but at $160, a lower average price than Apple gets for its iPods (which retail from $249 for the iPod mini to $599 for the 60GB iPod Photo). Looking ahead to next year, Neff forecasts Apple may be able to grab 30 percent of the 34 million players that market researcher IDC estimates will be sold.

While product rumors boost interest in the semi-annual Mac pilgrimage, Apple has not appreciated details leaking out about its plans. The company has filed suit against three sites, including Think Secret and Apple Insider, for information about the sources of stories about Apple developing what's known in the music industry as a breakout box--a device for connecting musical instruments and other analog audio sources to a computer.

CNET News.com's Ina Fried contributed to this report.