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.
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.
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