Mac mini Margins, Not So Mini

Posted by: Stephen Wildstrom on March 03, 2009

mini.jpgAs part of a general refresh of all desktop products, Apple today announced a long-overdue update of the Mac mini line. The mini gets a badly needed upgrade of its processor to a 2.0 GHz Intel Core 2 Duo and the Intel integrated graphics adapter is replaced by a much superior NVIDIA GeForce 9400M. (This, by the way, means that Apple now uses NVIDIA graphics across the board.)

The mini is the cheapest product in the Mac line and the conventional wisdom holds that bottom-of-the-line products don’t yield profits. That is probably not the case for the mini. First, the base price of the mini with 1 GB of memory and a 120 GB hard drive is $599. That’s high enough to provide a reasonable amount of profit even on an entry-level product. Apple wants to build margin share, but has no intention of doing so by offering $300 door busters.

Even more interesting is the $799 upsell model. The extra $200 buys you an extra gigabyte of memory and an extra 200 GB of hard disk storage. Now the retail price of adding a gig of memory is less than $30, while the extra cost of those 200 GB of storage--again, for quantity-one retail--is about $40. Apple, of course, doesn't pay retail and my guess is the bill of materials for these two upgrades is between $25 and $50. A $200 boost in the selling price of the mini provides the sort of margin that other computer makers can only dream about.

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Reader Comments

Joe Don

March 4, 2009 02:40 AM

Since you didn't take it into account, does that mean Apple gets the 256MB 9400M video cards for the same price as the 128MB?

ChrisH

March 4, 2009 02:49 AM

Yeah Apple believes in inflating the price of there products because people are stupid enough to spend that kind of money. It's sad that the same computer, custom built that runs windows goes for 1/2 that price or less, with the same specs. What is it apple that makes you think that your product is worth that much? Ever hear of a budget PC? And sorry the MacMini is not budget, its a mini computer with horrible specs.

John Hawk

March 4, 2009 02:50 AM

The Mac mini was the best low profile unit for our flat panel. We bought a Gateway Flat Panel in 2003 and now we use the Mini to run Slingbox in Tokyo on the Gateway. We don't need memory and we will by another Mac mini for another TV room ...

Psymac

March 4, 2009 02:54 AM

The $799 also buys you more video ram.

LS Chang

March 4, 2009 03:04 AM

Only goes to show that Apple is exploiting its brand positioning to the hilt.

Van

March 4, 2009 03:11 AM

Apple doesn't quite use Nvidia across the board, the new Mac Pro's (highest margins of all Apple products) can be equipped with ATI 4850's

coh1

March 4, 2009 04:51 AM

The 940m is kinda old, I looked at Newegg's site and the 940m isn't even being sold anymore. They should be using the 960m GT at minimum, it's way superior, especially at $600 w/o monitor.

huh!

March 4, 2009 04:59 AM

And folks are dumb enough to fall for that (just because its an Apple product)! Sheesh!

blackie

March 4, 2009 05:06 AM

Money is no object, when you haven't any. What a hoot! Apple's are pretty. But really, the cost isn't worth it...unless Coopertino has snowed you with their hype of quality and satisfaction.

bruce

March 4, 2009 05:39 AM

and, oh, yes, don't forget, you still need to pay a few more dollars for..um...a keyboard, a mouse, and, oh yeah, a monitor, then you're all set, and that $799 is more like $1100. No, thanks. For that $1100 I can get a later Intel CPU (quad core) 2GB of memory, a 500GB hard drive and say a GeoForce 7900 card, take it home get out my partition magic disk, wipe vista and the bloatware, install Win XP Pro and Office 97, and be set to go. I'm a PC :P

Edward Dziadowicz

March 4, 2009 06:00 AM

Hmmmm. Wow! I can hardly wait! I can buy a Mac mini, with the power, storage, and memory of a net book for the same price that I spent for my loaded HP Media Center PC. What a bargain.

twitter.com/mccaw

March 4, 2009 06:01 AM

"Oh, Apple, you spoil us!" Fail.

Barty

March 4, 2009 06:08 AM

You're forgetting that the $799 version also has more video memory.

Mouhaha

March 4, 2009 07:24 AM

(Some) Mac users just love to get powned, and take this kind of laughable margins, this scam, with a bliss smile on their face. You can usually build a PC with the exact same hardware for half the price -if not even less- than its Mac counterpart...

Jay

March 4, 2009 07:58 AM

Also the $599 version has a 9400 with 128MB where the $799 version has a 9400 with 256MB. I won't buy till I see some Benchmark numbers and 3Dmark scores.

Steve Wildstrom

March 4, 2009 09:23 AM

Several commenters are right--I overlooked the extra video RAM. Add $5 or so to the bill of materials. But it doesn't change the point materially--there's a lot of margin in that $200 premium.

Anthony Hu

March 4, 2009 09:55 AM

Do what most of us real-people-in-hard-times do, build yourself an HTPC. Seriously, what can be more gratifying than to see how much you save on things that give you far better value.

I'd built just such a small form factor PC for a friend recently who's looking to cut back. This is what we ended up with. AMD 5400+ overclocked to 3.1GHz with a cheap, taller HFS. ATI 780G motherboard with IGP core overclocked by nearly 2X. 4GB RAM. 1TB hard drive. You know, choices that they tear out your limbs for. We didn't even get a graphics card because my friend finds the onboard one more than suffices. But it's good to know that should his kids nag him, we can throw an Nvidia or ATI card in there with enough firepower to blow a few holes in the cheap integrated video the Mac Mini has.

All in all, good luck to those who buy name brands. It may have been cool to think differently before. But it's a different time now, and a different game.

Mike

March 4, 2009 10:00 AM

Apple computers seem overpriced when comparing them spec-wise to their PC counterparts. The mini seems like an especially bad deal in this regard. However, having used computers essentially every day for nineteen years, I believe the overall user experience offered by Macs justifies the price premium. As one example, the iLife software bundled with new Macs is a superb package of photo, movie, and music editing software that is easily worth several hundred dollars when translated to the PC world. Additionally, the maintenance on my Macs is still about nil compared to the ongoing drama of keeping my PCs safe and in good order.

Bill in NC

March 4, 2009 10:08 AM

The $799 Mini doesn't have more video memory.

It just uses more of main memory as video memory because it has double the RAM (1GB of RAM on the $599 Mini, 2GB on the $799 Mini)

You can replace the 1GB of RAM in the base $599 Mini with the maximum 4GB of RAM for under $100.

Then your base Mini will also use 256MB of RAM as shared video memory.

Also, the newest 500GB (7200RPM) notebook drive costs under $150, so buy the base Mini and upgrade the RAM and hard drive yourself.

Chris

March 4, 2009 10:45 AM

The margins likely go towards the cost of developing the software that is bundled with the machine. People seem to forget that hardware is only half the story with Mac products. I would argue that the bundled software on a Mac, ILife for example, is superior to the bundled software on a budget PC. Most people buy a computer because of what it does, not the specs and numbers of the internal parts...

jr

March 4, 2009 01:42 PM

@Chris: you're the man!!
@Others: The bundled apps alone do justify the (hardly) premium price of macs. I can't stand these winbloze zealots who have nothing else to do than to promote yes, cheap, but clearly inferior products. Lol.. take a part from this company, then one from that company and there you have your frankenstein PC. Haha.. The 90's called and want all you piece-a-meal freaks back. Now Mac OS X, hardware, software come from one company!! That control is THE BEST SOLUTION TODAY!! Tell me what other company does that!?!? What a waste of time to configure a bare bones machine b/c it's half the price. Yes you must be a decade behind :( Good luck with making everything work out of the box, b/c it won't.

kwokgable

March 4, 2009 11:39 PM

If you only add up the costs of all its components, then Mac Mini is probably not worth it. But I don't recall any current PC out there so elegant-looking, so tiny (e.g. space-saving), with so many good ports (USB, firewire, DVI, etc.) and comes with so many useful software (e.g. OSX, iTunes, iPhoto, etc.). Not to mention you can recycle all your old PC parts (e.g. keyboard, mouse, monitor). Lastly, can PC manufacturers make NOT so noisy computers.

Atlantaman

March 5, 2009 12:46 AM

By the time I add a small amount of RAM and hard drive space + Applecare to the Mini, I'm spending well over $1,000.00. I just bought a Dell XPS system with 8 gigs of DDR3 RAM, a 640 gig hard drive, and a 512 meg dual monitor video card - for just UNDER $1,000.00 - several times the processing power of the mini, or for that matter, an iMac specked out with upgrades that would bring it to over twice that price - or MORE.


OSX is a wonderful operating system, I will agree. But it's certainly not worth paying 2-3 times more for a machine that has it. Sorry, Apple.

al

March 6, 2009 08:46 AM

The hype over Mac's included software is just that... Hype. There are plenty of free or very low cost alternatives to iLife that do just as good a job.

The other thing no Mac fan wants to talk about is the cost of additional software for the Mac. I have found that just about every piece of SW for the Mac is more expensive than the equivalent SW for the PC. So cost of ownership continues to be high for the Mac user.

All Apple products are "lifestyle" products (Apple's own words). This is marketing lingo for "luxury items that we can get people to pay a lot of money for". Of course, I say this as I am listening to my IPOD Touch (what a scam that is...) and my wife is using her IPOD Mini (oh, and I an seriously considering a Mac Mini as well).

The difference is that I am not trying to justify the purchases in any way other than I want the luxury item.

Andrew

March 6, 2009 04:18 PM

Look, everyone knows the price is unjustifiable on the merits -- $800 for a Mac Mini? It's basically a low end notebook computer, minus the two most expensive components -- the screen and the battery.

But I had one of the last-gen ones a while back. We needed a Mac at the office for cross-platform browser testing, so we bought the $600 Mini. One nice thing -- because it's really small and doesn't come with a monitor or anything, it's convenient to hook into an existing setup with a KVM.

It was only occasionally used for testing, and the rest of the time it ended getting hooked up to the projector. On friday afternoons and such, we'd sometimes throw on a movie with it, occasionally play music, things like that. It's a very nice little system for stuff like that, and the simple remote is really well integrated with the software.

I could totally see buying one of these as a set top box -- if you don't really care too much about the price tax. And as the good times rolled, there were lots of people who didn't.

But personally, I would never spend my own money on one unless I had some concrete reason I needed a Mac.

Dide

March 11, 2009 07:21 PM

Every PC I have ever owned has brought me random frustration and hours of extra maintenance. Every Apple product I have ever owned does what its supposed to and earns every extra penny I may have paid. The resale value will also make up any extra cost if you decide to upgrade in the future. Try selling your FrankenPC on ebay for anything more than a Quiznos sub.

Artyom Diogtev

July 29, 2009 02:41 PM

Now guys, add to this conversation the fact that across the Europe and particular in my country (Ukraine) the price for the latest Mac Mini is respectively $1,000 and 1,300 ! While the previous model in local stores cost and still cost the same money as the current model. Bottom line, Apple doesn't ask more for the new model, our local retailers do, Apple do not charge more money for including Ndivia video card, which makes a world of a difference in comparing with the previous model, local retailers - do. IT IS NOT FARE.

Stephen

August 11, 2009 06:36 PM

I bought the base 2009 Mini w/ 1 gb ram. It showed 128 MB video mem in the system info screen. I upgrade to 4 gb myself and now it shows 256 MB. The system automatically allocates the memory based on how much you add since it is shared memory, not dedicated. I bet if I added just 1gb to make it 2 gb total, it would allocated 256 mb to video already. But I'm to lazy to take the Mini apart to remove the memory to test that.

Boomer

August 19, 2009 11:45 PM

WOW, unbelievable how brainwashed the Winblows people are now days! Look, I used to be a die hard Winblows fan until I got a mini used about 1yr ago. At that time it was built up as an HTPC for a DLP projector and I can tell ya, I only had to reboot it about 2x in one year!! HD 1080i decoding, HDTV tuner and more for $350 used!!

I am in the process of building up another "Project" machine to run OS X and at this time, I cannot come close to what my CD2 mini has in it. Reason being is this. By the time you take an off the shelf system, add wireless + Bluetooth, add and IR receiver with remote, add firewire, a DECENT automated backup software package like time machine, then you have the cost of a base Mac Mini.

Dont get me wrong, I have WIN7 machines also, but in the end a MAC OS X machine wins hands down especially when it comes to 64 bit processing.

I DON'T agree with mac's price point for extras like RAM and HD space though, that we can all agree on. But in any case if you have some patience, you can upgrade a mini for about 1/2 the price!!!

Now with that said, check your local craigslist site, get a USED MINI. Try it, ya might like it, especially if you do LOTS of multimedia like I do!

Boomer

August 19, 2009 11:50 PM

PS- And on the OS, how many Windows OS releases come out and actually RUN the first time around? Remember the Vista fiasco and how they covered their butts calling it "Mojave" to save their butts from the problems? Now that same problem child is known as RC2 Win 7!! I thought you would remember that!

Even with the new release of Snow Leopard coming, the seed I have is more stable than any RC MS has ever put out (i.e. Win 7)!

Siafu

September 26, 2009 02:41 AM

It's cute how mad everyone is. I just built an ion tower in an m350 mini itx enclosure, running windows 7. It's every bit the machine my mini is, at a $350 total price tag. It's really a matter of taste, so stop being ladies about this. Win 7 has borrowed some of the best features of osx now, and it's a dream on memory and CPU. I don't care what the starbucks, old navy, volvo crowd has to say about mac. Osx is pretty, and no would be artist would be complete without one (let me tell you:). The facts are thus: the mac was is and always will be the idiot proof machine. The OS is super simple, and lacks power user features. The new windows crowd is really getting close to the same now. There is greater control (argue that with the GUI department alone) and if you are smarter than a chimp, building one is SIMPLE now. Don't beleive me? Google it.
That said, I close here: both sides are stupid,

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