Apple’s next trick: Resurrecting the desktop PC

August 7, 2007, 2:11 PM UTC

Don’t tell Steve Jobs the desktop is dead.

The Apple (AAPL) CEO today showed that he’s determined to make a nice profit selling iMacs to consumers. If Jobs succeeds – and the real test will come this holiday season – he will have successfully bucked recent industry trends.
[Photo gallery: new iMacs]

In recent talks with industry analysts, key PC suppliers such as Intel (INTC) and Advanced Micro Devices (AMD) have repeated the same refrain: There’s little money to be made selling desktop PCs like the iMac. Bargain-hunting consumers and overseas businesses now make up a large

proportion of desktop computer buyers, and cheap is often the name of the game; PC market share leader Hewlett-Packard (HPQ) offers a desktop that includes a 15-inch LCD monitor starting at $400.

Apple’s new iMacs, by contrast, start at $1,200 – three times the price.

Jobs made no apology for the price gap. Apple isn’t interested in selling low-end PCs, he told the crowd that gathered at the company’s Cupertino campus. Apple wants to offer a certain level of computing experience, and that can’t be done on the cheap. “We just can’t ship junk,” Jobs said. “There are thresholds we can’t cross because of who we are.” Thus the new entry-level iMac comes with a 20-inch glossy LCD screen, a dual-core Intel processor, a gigabyte of memory, a quarter-terabyte of storage, and a built-in webcam, among other features – stats that blow away the typical entry-level desktop. Plus, the new iMac’s aluminum and glass styling is strongly evocative of the company’s hit iPhone.

Will the price tag sink the new iMac? Don’t be so sure. Remember, skeptics had the same criticism of the iMac’s design muse, the iPhone. With its $500 entry price, the iPhone considerably more expensive than the cheapest cell phone (which is free) – but people are buying it anyway. Customers bought 270,000 iPhones in the first 30 hours it was on sale, and Apple continues to be confident that it will sell a million iPhones by the end of September. (The iPhone is the #8 bestselling item on Apple’s online store today, apparently selling faster than any single desktop or laptop computer in Apple’s lineup.)

The question, though, is whether mainstream consumers can fall back in love with a desktop computer, no matter how stylish. Advanced phones are the new frontier of tech innovation – they’re mobile, visible status symbols. Laptops too are devices of the moment; we use them in public, and they reflect on our sense of style.

But desktops? Often they sit in a corner of the bedroom or the den, with all the elegance of a water heater or a file cabinet. Jobs is convinced that certain consumers – the iPhone crowd, perhaps – want some elegance in the corners of their lives as well.

“Desktops are still, today an important part,” Jobs said in answer to a journalist’s question. “We think the iMac’s got a pretty strong future to it.”

We’ll see if computer buyers agree.