I nearly paid that much for the first 16GB iPhone. The Mac mini has much more power and can drive a larger display (but doesn't make phone calls).
Obviously every Apple product is not for everyone. The $999 Mac mini server with dual 500MB 7200 RPM hard drives is quite a value for a small enterprise.
You try telling any small business or any business that they should get a Mac mini for their server. They'll laugh in your face. Take this from someone who visits numerous small businesses and regional operations in a month.