Apple Fans Pay a Premium for Coolness


CUPERTINO, Calif. (TheStreet) — Loyalty comes at a price. For Apple (Stock Quote: AAPL), it's between $1,600 and $4,100.

With the launch of its iPad tablet last month, Apple established the four pillars of its tech toy box. If you want to be Steve Jobs' best buddy and become the most design-savvy techie in the coffee shop, you'll need an iPod, iPhone, iPad and MacBook.

The Apple clique's minimum buy-in — which would cover a featureless iPod Shuffle, an aging and flawed iPhone 3G, an iPad with as much memory as your iPhone and a MacBook that hasn't gone Pro — is $1,656. That doesn't include fees for wireless service for your laptop and Wi-Fi-only tablet, or the roughly $90 a month AT&T (Stock Quote: T) charges for its iPhone data plan.

Given that Consumer Reports has found cheaper, more functional alternatives in each category, from the low-maintenance $30 Archon Clipper MP3 player to the $530 Toshiba Satellite T135 Windows 7 laptop, is Apple's cultural cachet worth its asking price?

"You can have a great marketing campaign, but it doesn't mean anything if you don't have a solid product to back it up," says Susan Kevorkian, an Apple analyst at IDC. "The products that have really worked for Apple have hit a nerve among consumers and filled a need that hadn't been filled in the past."

Though Apple's quality starts to outpace the pack in the upper echelons, so does the price. Amassing all of Apple's mid-range models — an 8-gigabyte iPod Touch, a 16-gigabyte iPhone 3GS, a 64-gigabyte Wi-Fi-only iPad and a 160-gigabyte MacBook Pro — would cost $2,296. On the high end, a 64-gigabyte iPod Touch, a 32-gigabyte iPhone 3GS, a 64-gigabyte 3G/Wi-Fi iPad and a 17-inch MacBook Pro with a 500-gigabyte hard drive would set fanboys back $4,026.

With the National Retail Federation predicting a 2.5% jump in retail sales this year, Apple may be onto something. The Cupertino, Calif.-based company will also reap a large chunk of the $6.2 billion consumers are expected to spend on applications this year, according to Gartner.

Apple's anchor MacBook has earned its keep so far, contributing to a 22% increase in computer shipments in the fourth quarter from a year earlier, Gartner says. "Apple laptops end up at the top of the list in every size category," says Paul Reynolds, Consumer Reports' electronics editor. "Apple's tech support is also still better than that of any PC company."

It's in the other categories that Apple's luxury prices appear a bit gaudy. Adding video capability to the $150 8-gigabyte iPod Nano brought it in line with its mid-range competitors, but products such as Samsung's $100 8-gigabyte YP-Q2 and SanDisk's $80 Sansa View offer higher quality and more features for a fraction of the cost.

Reynolds says the iPhone's value isn't diminished by the price of competitors such as Motorola's (Stock Quote: MOT) Droid, Google's (Stock Quote: GOOG) Nexus One and Research In Motion's (Stock Quote: RIMM) BlackBerry Storm. However, the cost differences become clear when you compare their data plans.

AT&T has taken advantage of its position as exclusive service provider for the iPhone. Rival phone makers have been able to court customers by offering cheaper service through Sprint Nextel, Verizon (Stock Quote: VZ) and T-Mobile.

AT&T's service and cost has softened a bit for the iPad's $30-a-month unlimited usage agreement. The iPad also costs far less than the nearly $2,500 Dell Latitude XT2 or $1,900 Lenovo ThinkPad X200 tablets, but the merits of a high-end $699-$829 iPad versus a $455 to $549 Asus Eee tablet depends more on the person than the product.

This sums up the Apple cult. There may be cheaper, leaner, more functional devices out there, but who wants them? Apple's users want toys they can use without taking night school courses that will be durable enough to keep them out of Best Buy for years at a stretch. Though products like the iPod Shuffle offer a cheap point of entry, it's just a sprinkle of sugar to get users strung out on the good stuff. While its competitors offer lower prices and enhanced integration, Apple is content to let prices climb.

"All tech companies want three screens — TV, PC and cell phones," says Ross Rubin, NPD Group's executive director of industry analysis. "Sony, Panasonic and Samsung compete in a vast market with many different price points and feature sets. Apple has not taken that approach."

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