[gte910h]

Maximized profit is achieved by hitting profit X unit sold

If unit sold goes up by more than the lost per unit profit, then that's a winning proposition.

If people convert to the Apple brand, then Apple is going to make tons more than just that first sale. SSD prices also have probably REALLY made that 1k MBA a high profit device (they dropped a ton in the last year)

I predict the $800 MBA will just be this years 1k MBA.

See: The iPod Nano, the still sold iPhone 3GS (for $0 with 2 year contract), etc for past downmarket moves.

[achompas]

This comment isn't clear, but you make a few good points.

Short-run profits are maximized by producing at the point where marginal benefit = marginal costs (I think you state as much: "If unit sold goes up by more than the lost per unit profit, then that's a winning proposition."). Apple might want to produce these if the cost equation works (it might not--see below.).

You're also addressing the halo effect ("If people convert to the Apple brand, then Apple is going to make tons more than just that first sale.") This is anecdotally true: after I bought my first iPod in 2004, I purchased my first Mac in 2005 and now purchase Apple products as I'm happier in their ecosystem.

With that being said, what will Apple cut back on to generate large margins for a $800 MBA? Do they decrease storage? Produce a smaller (9.6") laptop? I really don't see how they go to $800 and preserve margins.

[gte910h]

>I really don't see how they go to $800 and preserve margins.

When manufacturing electronics, the cost curve has HUGE fixed cost elements (design, factory setup, supply chain setup, quality control adjustments), then relatively few marginal cost items (actual materials and shipping). Additionally, in tech, storage and ram of a given size typically gets cheaper year after year. SSDs have dropped precipitously from about $2 a GB wholesale to about $0.78 or less a GB wholesale.

So while they may only have had $50-100 profit on the newest 1k MBA on release day, they probably have 2-3 times that by now on the line. They can still sell it profitably (most likely) at this point as they get no more fixed costs with regards to the product.

Now you say 'Why not keep selling at 1k?'. The reason that doesn't work is because they're releasing a new line. So this older design (current 1k MBA) is just going to be obsoleted if they don't make a 800 MBA. They'll go back to the same initial high upfront cost 1k MBA.

Sure, some of the 800 MBA sales will be cannibalization of the 1k MBA sales they'd make this year. However, as I mentioned before, electronics have a very high start up cost for a new line, per item profit will actually be pretty similar between the new line and last years line, but they'll sell more total units, making higher profit.

[toadkick]

Well, typically Apple just sells all of the stock of their current Macs when they are about to release a new model. The rumor mill usually kicks into high gear around the time all of the retail and online stores start running low on stock. In fact, with Macs, they typically do just upgrade the hardware and keep the price point the same on the newer models. I'm not saying that it's impossible that Apple would release an $800 MB Air, just that it would be atypical for them, and it seems unlikely. Maybe if this story offered some actual evidence for why Apple would drop it's prices, but it didn't. All it says is "Somebody somewhere said so", and continues on to actually weaken it's point by saying that everybody else in the "ultrabook" segment is cutting back production, presumably because they aren't selling well vs. the MB Air.

[gte910h]

"Suppliers" said so. That is evidence? Same way we knew retina was coming. They may be unreliable, but it's still evidence.

[toadkick]

It's one thing for suppliers to leak info on hardware they are supplying, but I'm sure Apple doesn't give inside information such as end product pricing to them. It's BS. And the fact that it's coming from Digitimes makes it even more suspect.

[toadkick]

It's one thing for suppliers to leak info on hardware they are supplying, but I'm sure Apple doesn't give inside information such as pricing strategy to them. It's BS. And the fact that it's coming from Digitimes makes it even more suspect.

[achompas]

SSDs have dropped precipitously from about $2 a GB wholesale to about $0.78 or less a GB wholesale.

Has this happened recently? I know retail != wholesale, but I haven't seen SSD prices drop at NewEgg for some time.

[gte910h]

http://www.anandtech.com/show/3756/2010-value-ssd-100-roundu...

http://www.tomshardware.com/reviews/best-ssd-price-per-gb-ss...

http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3D...

Look at the prices for a given manufacturer over time. These 3 links show 2008, 2010, 2011, and 2012

[achompas]

Thanks for the tip--I held off on an Intel 160GB for $250 back in January, and now the same price gets me a 256GB!