Apple prices *are* too high - book version
Apple is in a very interesting business position.
To survive long-term, Apple will need to increase its marketshare. While the company is very driven and innovative right now, you can't expect that Apple will be able to sustain that year-in and year-out for eternity.
Two things are keeping Apple afloat these days.
1) Loyalty (maintaining current customers)
2) Innovation (attracting enough new customer base to keep up in an expanding market)
So long as Apple can maintain those factors, they will maintain their current share. Every time Apple slips on either of these, they will lose share.
The only factors that will increase Apple's share in a PC dominant world are the following, and in order of importance.
1) Price
2) Compatibility
3) Innovation
While Apple is doing a very good job with Innovation and making small steps in the area of Compatibility, they are *way* behind in pricing their machines competitively.
This isn't necessarily a bad thing in a recession. It's more important to survive right now (maintain customers) than it is to increase share. Dell was very fortunate to be the leading PC manufacturer when the recession starting taking hold. The result is that they are strong enough financially to squash those who compete directly with them.
I think that Apple is currently trying to get its ducks in a row. And it seems to me that there are still a few ducks to get lined up.
1) The Hardware - Apple needs to get the right product balance in place so that sales balance correctly. Right now, the professional line is too weak to make a serious play for new customers. Inparticular, Apple risks losing (higher-profit) professional sales to the new iMac. They have limited this by limiting the screen size of the iMac to 15". However, they have also cut into potential "middle market" sales by doing this. Apple needs to introduce serious professional hardware and then introduce a 17" iMac to fill the middle slot.
2) The Software - Although they're making great strides here, Apple still has a way to go. OS X is getting better all the time, but it's still lacking in some areas... especially in the area of Windows network compatibility which is key to getting Macs to be considered in any kind of role where a PC network is present. As well, a few more killer apps (Photoshop, iPhoto 2, etc.) need to be in place. Compatibility with MS networks, logins, file formats and applications.
3) New/Better consumer products. The iPod is a great device. At $100 less and twice the capacity, it becomes a "killer" device that *will* drive iMac sales. The role of the iPod will likely expand, as well, to become a "mobile home directory" as some users are currently doing. Expect this to become an Apple-sanctioned use for the iPod as it will help to sell multiple computers (desktop + laptop) to customers.
4) The end of the recession. It is reasonable to assume that Apple will never be 1-to-1 price competitive with Intel-based machines so long as Apple uses proprietary hardware (much less proprietary than it used to be - we can thank Gil Amelio and John Rubenstein for that). The price advantages due to volume will prevent this. In a tight market, it's going to be really tough to increase market share and attempting to do so in a significant way involves risking profits. That is something that's probably not wise at this point.
If these 4 things can line up within the next two years, Apple will be in a great position to get more aggressive with their pricing and increase US marketshare to something closer to 8% over 4 years (6 years from now).
However, compatibility is the "glass ceiling" that will stop Apple from acquiring significant marketshare. Significant gains will only be made by attracting corporate buyers. Apple should be pushing hardware-independent technologies very hard right now. They should have developers working on WINE, Samba, Mac OS X for intel, Java and anything else that holds the promise of making it easier for Macs to exist in a predominantly Wintel world.
Provided that Apple can execute on this, they then face a new challenge. At 8% marketshare and growing, Apple will be considered a threat to Microsoft. And I don't believe that MS would be very happy about letting that happen.