Is Apple About to Cut Mac Prices and Crush Microsoft?

If the report proves true, Apple could roll out cheaper Macs in 2014. Those Macs, combined with a slew of cheap laptops running Google's Chrome OS, could put pressure on Microsoft's Windows.

Coming in 2014: Cheaper Macs?
Apple's OS X, when compared to Microsoft's Windows, has been viewed by many as the superior operating system. However, Apple's relatively high prices have limited its market share. Historically, the average PC sells for around $600, and given that Apple's entry-level MacBook Air starts at $999, it's no surprise that Apple's PC market share hovers in the single-digits.

Years ago, before the release of the iPad, Steve Jobs was asked about his goals for the Mac line -- was Apple planning to surpass Microsoft's Windows in terms of popularity?

Our goal is to make the best personal computers in the world... and, we want to do that at the lowest prices we can. But I have to tell you, there's some stuff in our industry we wouldn't be proud to ship... we can't do it. We just can't ship junk.

I doubt that Apple has abandoned this philosophy (otherwise it wouldn't have released such an expensive iPhone 5c), but perhaps it has found a way to offer better computers at lower prices.

According to KGI Securities' Ming-Chi Kuo (via 9to5Mac), Apple is planning to release a 12-inch MacBook in the second or third quarter of 2014. In addition to sporting a Retina display and lighter body, the laptop could be offered at a lower price than current models.

But Kuo doesn't stop there -- he also thinks Apple plans to release a cheaper iMac, one that could better compete with desktops running Microsoft's Windows. Like the 12-inch MacBook, Kuo believes Apple's cheaper iMac could be available sometime next year.

Google's Chromebooks could eat away at the low end
But even if Apple were to cut the iMac's price by 25%, it would still cost nearly $1,000, far too expensive for many would-be PC buyers. According to research group NPD, sales of "entry-level" Windows PCs -- computers that cost less than $300 -- make up an increasingly large segment of the PC market.

During the recent back-to-school shopping season, sales of these budget computers running Microsoft's operating system jumped 14% from the prior year. Clearly, there's still a large group of cost-conscious buyers in the market.

But in time, these consumers could switch to a PC that doesn't run a Microsoft operating system. Chromebooks, laptops running Google's Chrome OS, are a growing alternative to Windows computers.

Google's Chromebooks have plenty of limitations, but they do excel in one area: price. Starting at just $199, Chromebooks offer an inexpensive way for users to browse the Internet, check email, and access cloud-based web applications. Despite the fact that they can't run local applications, they're quickly becoming a force to be reckoned with.

Last year, sales of Google's Chromebooks were insignificant. Today, that's no longer the case. NPD reported that 3.3% of the PCs sold during this past back-to-school shopping season were Chromebooks, up from basically nothing last year. In the years ahead, I would expect that percentage to increase significantly.

Nearly all of the major PC makers have thrown their support behind Google. Most of them have announced (or have begun selling) Chromebooks, including Acer, Asus, Samsung, Lenovo, and Hewlett-Packard.

Could Microsoft lose its core Windows market?
Sales of traditional PCs have been falling in recent quarters: Many consumers are buying mobile devices running Google's Android or Apple's iOS instead.

Still, it was easy to assume that Microsoft's Windows would persevere -- not everyone can trade in their PC for a tablet. As long as traditional PCs are still around, Microsoft will have a market for its operating system.

Or will it? If Apple releases cheap Macs next year, it could rob Microsoft of some of its Windows customers, particularly at the high end of the market. Cost-conscious consumers shopping for an entry-level device still wouldn't be able to afford a Mac, but here, too, Microsoft has its hands full. Google's Chrome OS is a cheap alternative to Microsoft's Windows, and has already been embraced by most of the major PC OEMs.

This trend may take several quarters to play out, but the death of Windows -- even among traditional PC users -- is one tech investors should focus on.

Are you an Apple investor?
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Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google. It also owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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