At the end of last month, Apple made two significant announcements. The phone to MP3 player to PC maker announced its much-anticipated iPad tablet. It also announced the most profitable quarter in its history.
Apple surprised analysts with an aggressive price point for the cheapest iPad, at $499. Chief executive Steve Jobs explained the pricing by saying he wanted the new tablet to reach as wide an audience as possible.
This is a new line for Apple, which has always charged a premium for its devices - and enjoyed healthy margins as a result. In fact, many of the same commentators who were wrong footed by the iPad pricing have criticised Apple in the past for its pricing, questioning the premium the maker charges for its hardware, over comparable Windows PCs.
The actual price difference between, say, a Dell or HP workstation or laptop and an Apple Mac is not actually that large these days, for comparable specifications. And Apple has consciously avoided low-cost, low margin products such as netbooks.
This might not please consumers, but it should please business users. Businesses rely on IT, and so they need viable, and profitable, suppliers.
Over the last few years falling margins have led to vendors leaving the PC business, or folding altogether, because they could not make a profit selling low-end kit. But with HP now the only large scale, vertically integrated IT companies (i.e. one that sells everything from PDAs to supercomputers) the argument that it is worth selling laptops or desktops at wafer-thin margins, or even a loss, to support sales of higher end kit no longer holds. Everyone in the IT value chain needs to be profitable.
Of course, Steve Jobs will be hoping that services revenues will provide an additional income from the iPad. And it might be that at $499 Apple can make a margin; no doubt it will do so on better-specced models.
But you can't ask a vendor to supply a tool for business, and then criticise them if they turn a profit by doing so.
Stephen Pritchard is a contributing editor at IT PRO. Comments? Questions? You can email him here.
