March 20, 2002 6:55 PM PST

Apple raises prices on new iMac

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Apple's been responsible for a number of PC innovations. And on Wednesday, the company came out with a new one: higher prices.

The Cupertino, Calif.-based company is raising the price of its new iMacs by $100, citing rising costs of flat-panel monitors and memory.

"Rapidly increasing component costs is an industrywide issue right now," Phil Schiller, Apple's senior vice president of marketing, said in a prepared statement. "Since the new iMac's launch in January, memory costs have tripled, and flat-panel costs have increased 25 percent, with little relief in sight."

Under the new pricing, the basic iMac price will rise from $1,299 to $1,399, while prices for intermediate and top-end models will climb by a similar amount to $1,599 and $1,899. The company said it will honor existing orders from resellers and orders placed on its online store.

The higher prices were posted on Apple's Web site late Wednesday.

Computer manufacturers rarely, if ever, raise prices. Instead, they might cut costs by reducing the amount of memory in a PC or changing components, or they might merely suck up the increase and hold out for the inevitable component price cuts. Dell Computer, for instance, adjusts PC prices almost on a daily basis. By contrast, Apple historically has chosen to market a few fixed configurations of PCs and often uses parts that are made by fewer manufacturers, reducing flexibility.

The new iMacs have been in short supply since Apple first showed them off in January. But a shortage of flat-panel screens, higher-than-anticipated demand and other factors resulted in waiting lists of five to 20 weeks at various distributors and dealers.

The picture, however, should change soon, said Greg Joswiak, senior director of hardware product marketing for Apple. The company has worked out the manufacturing kinks on the iMac--it is now shipping 5,000 a day, and volume will increase. Apple has shipped 125,000 units since the introduction, he said.

"There was no single issue. There was a manufacturing ramp starting at zero," he said. "We're not at full production yet."

Joswiak also disputed claims that Apple gave preference to its own stores over dealers during the supply shortage. Apple's retail stores and its online site only received 10 percent of the available iMacs, he said, with the remainder going to dealers around the world.

The component price hikes could hurt Apple's attempt to recruit new customers to its technology. When it was first unveiled, the new iMac was roughly comparable in price to flat-panel configurations from other PC manufacturers. Since then, PC manufacturers have managed to undercut Apple in price. Similarly configured PCs with flat panels from Gateway cost $300 less, while comparable bundles from Dell cost about $50 less.

PC makers often enjoy lower component costs than Apple because they buy the parts in higher volume. PC makers also can adjust their configurations to take advantage of sudden changes in component prices.

Prices for LCD screens have been rising since last August. Memory, meanwhile, has been rising since November, although the rate of increase has slowed in recent weeks.

Joswiak said the price hikes won't hurt Apple. Other PC companies typically sell the flat-panel monitor as a separate component, and those that sell all-in-one systems are pricing them in the same range as Apple. "We're still the value leader," he said.

Joswiak also reviewed other announcements made at Macworld Tokyo. As reported earlier by CNET News.com, the company came out with a $499 version of the iPod music player with a 10GB hard drive. For another $49, consumers can get a 54-character message engraved on the back.

All iPods also are now available with software that lets consumers store phone numbers, addresses and other contact information.

Despite the new software, the iPod won't likely be morphed into a Palm-like device.

"We see it primarily as a music player," Joswiak said.

In addition, the company showed off a high-resolution, 23-inch flat-panel display that can be used to watch high-definition television. The HD Display will cost $3,499 and will go on sale in April.

Apple also announced that it has released software that will let Mac OS X users run Bluetooth applications. Bluetooth is a wireless technology that lets consumers link handhelds or laptops through cell phones. The company also will sell hardware Bluetooth modules.

 

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