Monday, June 05, 2006, 02:00 pm

Best Buy may expand Mac pilot program

By Kasper Jade

Best Buy is prepared to expand a new Mac pilot program to additional retail stores if the concept proves to be successful, a couple of Wall Street analysts say.

The nation's No. 1 consumer electronics chain last week began evaluating a new planogram layout that prominently displays Apple's Mac line in a designated area of its personal computer department.

For the time being, the retailer is testing the program at just seven Best Buy locations in the Southern California region. Some 900+ remaining Best Buy outlets traditionally stock only Apple's iPod digital music players, and to a lesser extent, Mac mini desktop computers.

However, Best Buy has indicated that it is prepared to scale the Mac pilot program "rapidly" if it proves to be a hit, according to Steve Lidberg and David Niederman, two analysts with Pacific Crest Securities. They say a fortified relationship with the electronics retailer will present Apple with the opportunity to bulk up on its domestic retail presence.

According to the analysts, Macs are currently featured in about 650 storefronts throughout the United States. This includes 141 Apple-owned retail stores, as well as 225 Apple store-within-a-store boutiques inside CompUSA locations.

The opportunity to leverage Best Buy's exposure "could prove especially useful if supply-chain issues are worked out in the second half of 2006 and [Apple] is able to supply ample product to meet demand," Lidberg and Niederman say.

Although Apple's Macs are often touted as premium-priced computers aimed at graphics professionals, the analysts believe the recent proliferation of digital media sources amongst home users has raised consumers' expectations for new personal computer systems. And the Mac appears to have the advantage.

"Numerous industry 'shoot-outs' have compared the refreshed Intel-based Macs with their Windows equivalents and found Apple machines to perform equal to or better than competitors with costs roughly equivalent," they said. "A recent comparison of Apple's 17-inch flagship MacBook pro with a similarly equipped Dell XPS M1710 shows that the Dell machine costs $3199, compared with $2799 for the Mac."


Additionally, the analysts point out that Apple bundles its iLife '06 digital lifestyle suite of applications with each consumer Mac it sells. They estimate third-party Windows equivalents would cost around $360 -- assuming $40 for Catwalk Music Creator (GarageBand), $70 for Microsoft Frontpage (iWeb), $90 for Adobe Photoshop Elements (iPhoto) and $80 each for Pinnacle Studio (iMovie) and Roxio Creator (iDVD).

So far, Apple's digital strategy appears to be working. According to the retailers surveyed by Pacific Crest, an "increasing" number of Windows switchers are migrating to the Mac platform."

These consumers are said to be making the switch for variety of reasons, such as the Mac's dual boot option, improved stability and security. But they also dig the "aesthetic appeal" of Apple's products.