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Macbook Touch? Think Again. Completely Re-vamped Notebook Line Instead?

A recently republished rumor from our friends over at MacDailyNews about an upcoming Macbook Touch has recently attracted major attention across the web. So much so, that even the Wired Gadget Lab, not particularly known for endorsing or spreading mac rumors, has written about the elusive device as well. However, amongst all of the ongoing speculation, some analysts are saying that a completely revamped notebook line is more likely.

In Apple’s Q3 Financial Results Conference Call, a rather large goose egg was dropped on the industry, particularly the Apple community. Chief financial Officer Peter Oppenheimer referred several times to a “…future product transition which I can’t discuss today.” Normally Apple is extremely tight lipped about revealing any information to anybody. A strictly enforced need to know basis is what the company follows. So it came as a rather large surprise that an Apple exec would repeatedly refer to a mysterious product throughout a quarterly financial call.

This “product transition” phrase was interesting for two reasons, reports Robin Harris from ZDNet. Two reasons: 1) CFO Peter Oppenheimer and Apple were forecasting a large drop in Apple’s gross margins for the upcoming quarter, from 34.08% to 31.5%, and they needed to explain why. 2) Because Apple loves being secretive. They love the element of surprise, and they’re marketing and rumor mongering is genius.

Harris continues to report:Press reports of the call have tended to emphasize the difference between Apple’s reported gross margin of 34.8% and the forecast gross margin 31.5%. But that isn’t the right way to look at it.

The real difference is between what they forecast for the June quarter and what they are forecasting the September quarter. The gross margin forecast for the June quarter was a 33%. Thus the drop from the June quarter to the September quarter is a 150 basis points drop.

Starting with that and depending on how you forecast growth, Apple is looking at an investment in the current quarter’s Back-To-School promotion and the “product transition” of from $120 million to as much as $400 million. The average iPod goes at the door at $150 – so if they sell 1 million BTS Macs, the promotion will cost (price less GM) on the order of $100 million, probably much less since they only sold 2.5 million Macs in the June quarter.

So the product transition has a war chest of anywhere from $60 million to – on the high side – $300 million. Let’s split the difference on the conservative side and say $150 million for the transition.

This is a major difference in earnings. This “product transition” could definitely end up costing Apple a lot of money, therefore dropping their gross margin %, which could leak into Wall Street’s analysis of the company, therefore dropping the overall stock price immensely.

If this product transition is really as major as CFO Peter Oppenheimer claims it will be, then introducing a Macbook touch will not cost Apple nearly what is being reported will be spent. A major transition in their notebook lineup is more likely. Although a Macbook touch may be part of that transition, Oppenheimer referred to an overall “transition,” not a single product.

Between all of Apple’s computer sales, 60% are notebooks, and 40% are desktops. Additionally, 60% of Apple’s revenue comes from Macs. iPhone and iPod sales are getting bigger, and the new App Store, just like iTunes will rake in a small profit. But most of Apple’s profit comes straight from computer sales.

Apple’s notebook line hasn’t had a major redesign in years. The timing is right, the industry products available are extremely powerful, and prices throughout the world have been dropping on the various components that Apple uses in its notebooks. So when Oppenheimer says that Apple is readying a slew of price slashes, the notebook line comes to mind.

ZDNet reports about several items in the notebook line that are due for a significant upgrade.

• “Quad core processors. The differentiation between the Mac book pros and the vanilla MacBooks has been declining for several quarters. The easiest way to reestablish their high-end credentials is through the recently announced Intel Quad core processors.”

• “Power management. Intel and others have announced a slew of more power efficient chips. Not only processors but multimedia decoding chips, networking chips, graphics, DRAM and hard drives. Maybe even solid state disks. Taken singly none of these warrant a redesign, but together a significantly more power efficient notebook can be built – either lighter or with a longer battery life.”

• “Blu-ray optical drives. Macs in general are simply not with the Blu-ray program, which is odd since Apple and Pixar have been longtime supporters of the blue ray program. Apple codecs do not support it and there are no factory installed Blu-ray capable drives available. That will change.”

• “Design. The MacBook Air points to several design themes that we can expect to see in the new Mac pros. These include larger track pads for multi-touch use and beveled edges to make the system look and feel slimmer.”

• “Motherboard flexibility. Intel’s current chipset architectures are reaching their limits. They have a number of new initiatives in I/O, memory, and system interconnect that Apple, with its focus on high-end notebooks, will incorporate.”

Given the size of Apple’s upcoming investment, this is not just another product introduction (a la the Macbook Air). ZDNet makes a good point in emphasizing the length of time Apple waited to enter the mobile phone industry. By Apple releasing a Macbook touch, they would be taking another huge gamble. One that their stock price, and their revenue can not afford to take during a “major product transition” in which prices will be slashed and earnings will be lost. This would be entirely out of character.

Although the Macbook touch rumor spread like wildfire, I simply cannot get behind it. It would make more sense for Apple to completely revamp their notebook line instead of releasing another ultra-mobile computer.