Apple Inc’s New iMac Could Drive Further Share Gains Against Microsoft’s Windows

Apple just launched a more affordable iMac, and the implications for both Apple and Microsoft's Windows are very interesting.

Jun 18, 2014 at 12:03PM


Apple's iMac family. Source: Apple. 

Confirmed today, Apple (NASDAQ:AAPL) launched a cheaper iMac for just $1099 (which is $200 less than the prior lowest-end model). The new iMac appears to use an Intel (NASDAQ:INTC) Core i5-4260U, which is a low-power, dual-core notebook/Ultrabook focused processor rather than the higher power/higher performance quad-core processors found in the $1299 and above iMacs. Further, it comes with a 500 gigabyte hard disk drive by default rather than the 1 terabyte model found in the $1299 model.

Mac is still strategically important
If you look at Apple's financials, you'll note that a relatively small part of the company's revenue base is dependent on the Mac. In the most recent quarter, Mac sales came out to about $5.5 billion -- paling in comparison to the $26.1 billion and $7.61 billion that the iPhone and iPad generated, respectively. While not a gigantic part of Apple's revenue base, Mac is still strategically important.

At Apple's Worldwide Developers Conference, the company showed off an entirely revamped Mac OS known as Yosemite. While the new features and enhancements were numerous, the most important part of the entire Mac presentation was that the Mac and the iPhone/iPad will now work seamlessly together. Apples pitch is this: for a user that owns a Mac, owning an iPhone is a good idea. And, of course, for a user that prefers an iPhone, owning a Mac is a good idea.

Making Mac more affordable is an excellent move
By making Mac more affordable, Apple will presumably increase its share of the PC market (continuing a multi-quarter trend). At this new price point, Apple will now be able to capture more of the users frustrated with Microsoft's (NASDAQ:MSFT) Windows 8.1 based systems, which should have a positive direct revenue impact vis-à-vis Mac.

More importantly, is that users who make the switch will probably be more likely to continue to use iPhone/iPad if they are already Apple users. For users that have been buying Android devices, Apple now has an additional marketing point to try to get those users to switch since those devices will now work seamlessly with the new, affordable Mac that they just purchased.

Bad news for Microsoft?
While the PC market has shown signs of recovery as of late, there's some indication that many are unhappy with Windows 8.1 and would have preferred a more clamshell/desktop oriented operating system. If more users switch to Mac as a result of the more affordable price point, then this not only directly impacts Microsoft's Windows revenue, but also gets in the way of its goal of proliferating Windows-based tablets and Windows based smartphones.

Foolish bottom line
Apple first showed signs of being aggressive with Mac when it refreshed the MacBook Air and simultaneously cut the price by $100. Now, with iMac, Apple is introducing a lower-cost, lower-performance model in order to try to further capture share from Windows PCs and to bolster its device ecosystem.

Whether the impact of Apple's moves with Mac is ultimately material is hard to call now, but Apple is broadening its ecosystem and priming the pump for when the next generation of iPhone/iPad devices launch later this year. Given how sensitive Apple's financials are to the sales of iPhone (and to an important but lesser extent, iPad), anything Apple can do to bring more customers to an iPhone or iPad without compromising on the margins of those products looks like a smart business decision.

Apple's next big thing is almost here, but here's a better way to play it than Apple stock
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Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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