Apple Computer Cuts Prices, Offers Rebates on Macintosh : Technology: Analysts say the move is part of the firm’s strategy to increase market share.
Apple Computer Inc., buckling under competitive pressure, said it has cut prices on Macintosh personal computers as much as 12.6%.
Apple also slashed prices of printers and other peripherals as much as 26%, and is offering rebates of up to $350.
The cuts had been expected since Apple said last week that its second-half earnings will be less than those of a year ago. In the face of profit-eating price wars, Apple said it will focus on increasing its unit volume.
“The critical thing is gaining market share,” said Mark Jordan, an analyst with A. G. Edwards. “You are not winning the PC game if you are just maintaining market share.”
In 1992, Apple had a little more than 13% of the personal computer market worldwide, Edwards said. The company has gained market share this year, but the gains have come with having to accept poorer margins, he said.
Apple, whose Macintosh PCs have no direct competition, in the past garnered a premium of 10% to 15% over other personal computer makers, he said. The price cuts will further trim that premium.
In keeping with its new emphasis on volume, Apple said its U.S. division is using two “aggressive pricing programs” to gain market share in the United States.
In the first round of cuts, Apple will offer rebates of $50 to $350 on a selection of Macintosh portable and desktop computers and Apple scanners and printers. The rebate offer is to end Sept. 30.
More lasting reductions will come from slashing the suggested retail prices on computers by 6.8% to 12.6%. Those cuts apply to both desktop Macintosh models and Powerbooks, Apple’s notebook PC. Prices for printers, scanners and CD-ROMs, or compact disc read-only memories, were reduced as much as 26%.
“Momentum for Macintosh products remains strong; unit shipments increased 35% in the first half of our fiscal year,” said Bob Puette, president of Apple USA. “And we’re committed to accelerating that momentum.”
Apple also offered rebates on networking products. The company’s Enterprise Systems division said it will refund up to $1,000 to owners who upgrade to more powerful networking systems. Those rebates will be available until Sept. 30.
In NASDAQ trading Monday, Apple shares rose 87.5 cents to $44.625. The stock has lost a quarter of its value since May 20 because of the concern about second-half earnings.
Apple is competing neck and neck with International Business Machines Corp. for the lead in the $70-billion PC industry.
For the second half of fiscal 1992, Apple posted net income of $301.1 million, or $2.45 a share, on revenue of $3.6 billion.
Apple Chairman and CEO John Sculley said last week that while revenue has been improving, earnings are likely to show a decline.
In the second quarter of fiscal 1993, ended in March, Apple saw its gross margin fall steeply, to 38.5% from 44% in the comparable period of 1992. Apple reported its second-quarter net income slipped 18%, to $110.9 million, or 92 cents a share, while revenue rose 15% to $1.97 billion.
In the third quarter of 1992, Apple earned $131.6 million, or $1.07 a share, on revenue of $1.74 billion. That performance came largely before Compaq Computer Corp. triggered a round of major price cuts last June.
