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Technology Stocks : Apple Inc.

AAPL 275.92

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Feb 5 3:59 PM EST

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To: Marc Newman who wrote (21272)	12/18/1998 2:43:00 AM
From: Eric Yang	Read Replies (3) of 213185

"Eric, what are your thoughts about this $999 deal at Best Buy? I wonder if Apple is really pissed at them right now." I don't think the price cut was Apple authorized (at least not yet) so I can't imagine Apple being too happy about it. The $999 price was not officially advertised in Best Buy's latest ads. In fact the price which appeared in previous ads seems to have been intentionally removed this time. They did change the sign displayed underneath the iMac at the West LA Best Buy to $999. Best Buy has been getting a lot of bad press lately because of the uncompetitive nature of its iMac pricing and marketing. I think the price cut was directed at CompUSA. And since CompUSA has a significantly higher inventory this kind of price war would affect CompUSA more than Best Buy. Most VARs and resellers I talked to were shocked when I told them Best Buy's new pricing. Many of them were still purchasing iMacs at wholesale pricing of $1150-$1180 range. A couple of sources told me that some high volume resellers (both international and domestic) have recently been able to purchase iMacs for $999 from Apple. But buying iMacs wholesale for $999 and selling iMacs at $999 are two different things. Under normal circumstances Best Buy would have to be able to buy iMacs for around $890 for them to sell at $999. I don't think Apple is selling iMacs at $890 so Best Buy is probably selling them at cost. Monish of MacNN told me that Fry's was actually willing to take a loss in order to compete with CompUSA and Best Buy. To some degree competitive pricing among Apple resellers is good for the consumer and Apple; however if Best Buy broke rank and undercut the MAP by $300 without Apple's authorization and preempting Apple's own price cuts, it can hurts the rest of the Mac market in the long run. If this price cut was indeed unauthorized (as it appears to be) there will be hundreds of VARs calling Apple tomorrow morning. It'll be interesting to see how Apple will respond to this. Would they formally announce the a across the board price cut on iMacs? There are only 8 more days until the end of the quarter so what ever Apple chooses to do, it probably won't impact this quarter's margin by much anymore. Eric

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