It had to happen. When Apple decided to add quad-core processors to some versions of the new iMac, and increase the number of RAM slots, they cannibalized a lot of potential Mac Pro sales. Indeed, the vast majority of people who buy the remaining Macintosh tower computer can probably do quite nicely, thank you, with the iMac.

All right, I realize that breaking the expandable Mac habit is going to be hard. Ever since the original Mac II came out in the 1980s, Apple has always had products in the lineup with sufficient space to install lots of internal goodies. The latest Mac Pro is certainly an engineering tour de force that is closer in concept to a workstation than a personal computer. You can add tons of RAM, up to four hard drives and extra graphics boards or other expansion cards. If you’re engaged in heavy-duty content creation, including 3D rendering, there is probably no computer on the planet that’s better suited to your needs.

In the scheme of things, the Mac Pro is actually surprisingly inexpensive compared to the competition from such top-drawer PC vendors as Dell and HP. Indeed, I once mentioned to someone from Dell that an identically configured Mac Pro cost almost $1,000 less than their Dell Precision Workstation. Their response was to express surprise and say they’d get back to me. Well, they never did, and even today you’ll find that Apple is quite often ahead of the curve on price.

The real question is whether that model has become an anachronism except for a very small clientele. After all, current sales figures demonstrate that 74% of new Macs are portables. Sales of desktops are falling rapidly, and a similar situation holes true in the PC box market, where the biggest sales increase has actually been scored by note-books, which also means profits have been trimmed to the bone.

The iMac and Mac mini upgrades may do no more than slow the pace of decline, but I doubt that desktop sales erosion will end. The industry is moving in a different direction, and most people want something that’s relatively small, and easy to lug around from room to room. After all, all Mac note-books can drive big external displays when the need arises.

Of course, you have to wonder just how close an iMac will come to a Mac Pro in all-out performance. Certainly the quad-core Intel i5 and optional i7 are powerful chips, but there’s only one of either. As applications are updated to support Snow Leopard’s Grand Central Dispatch feature, they will still run faster on the Mac Pro, but the advantage will only be significant for a small minority of products. Most of you will never see the difference.

In terms of RAM, going to 16GB on an iMac remains expensive. Yes, you can save a lot by going to a third-party RAM vendor rather than picking Apple’s brand, but the sweet spot for the iMac is 8GB. Apple charges $200 to double the memory. You can do better, of course, but either way it’s a win-win situation.

But there is, of course, no space for a second drive. That would have been one of the features that would help deliver customers who crave double hard drives, and there are a fair number out there. Yes, you’ll get good performance with an external FireWire 800 device, but I don’t think that’s necessarily the ideal replacement.

The other issue, of course, is that the iMac comes with an integrated display that you may not really need. You are paying lots extra for the privilege of having an all-in-one. Sure, the display may be nearly as great as Apple claims, and it may even be better suited for color calibration than other LCD panels. But if you’ve already invested in the display you want, as I have done, I can see where you’d prefer not to pay for an item you don’t need.

Yes, the Mac mini is a pretty speedy devil, but it won’t match the fully-outfitted iMac. Moreover, there is probably no chance that Apple is going to add another expandable desktop to its lineup considering where the market is heading.

Despite my concerns, the iMac appears destined for a reasonable level of success. As I write this article, it topped the charts at Apple’s online store, although that probably represents the initial demand rather than the new model’s long-term prospects.

The fact that it seems able to also double as a small TV set is a real plus, so long as you have a cable and/or satellite set-top box at hand. Or an Elgato EyeTV. Maybe this is what Steve Jobs was really talking about all along when he spoke of the personal computer as the hub of your digital lifestyle. But I don’t anticipate a 52-inch iMac anytime soon to replace the family flat panel TV.

As to the Mac Pro, it’ll likely remain in Apple’s lineup for quite a while yet, and continue to receive regular refreshes. But the number of buyers will continue to decrease and maybe, just maybe, it’ll become a relic of history in the next five years.

So far, just about everything Apple has done ends up confounding the skeptics. So when they were admonished to cut prices sharply, they sort of responded with the MacBook Pro, but this week introduced new iMacs, a new MacBook and Mac mini lineup, and kept the prices at the same level as their predecessors.

How can Apple be so foolish as PC makers are fighting to dominate the bottom of the market with cheap gear?

I suppose Apple could have simply retained their existing product lineup and shaved $200 off each model, and they would have been praised to the skies for their foresight. Instead, they added additional value to the products by offering more powerful processors, more memory, and loads of new features while not raising any prices. So if you wanted the old iMac, it’s no doubt the new iMac will be a far more attractive proposition.

Indeed, I’m beginning to wonder whether the iMac isn’t going to cannibalize more sales from the Mac Pro, now that there is a quad-core processor option fpr the high-end version. There’s also the ability to add up to four memory modules. All right, 4GB sticks are still quite expensive, even from third-party vendors, but you could get an 8GB iMac from Apple for just $200 more than the standard versions.

This isn’t to say there’s no market left for a Mac Pro. If you don’t need a display and require the ability to plug in even more memory and extra internal drives, you have no choice. Apple still doesn’t see a fit for a midrange minitower, in the tradition of the compact IIcx of years ago. Since desktop sales continue to decline, I can see why Apple has no incentive to expand the product lineup. At best, the new models may smooth the sales dip, but possibly not eliminate the onward migration to note-books.

As far as I’m concerned, I still prefer my Mac Pro for most computing chores, but I can see the day where mobile quad-core processors will be nearly as powerful, and sufficiently energy efficient not to reduce battery life substantially. That, and perhaps adding two ExpressCard slots for people who really want to use them, will further reduce the need for a hefty desktop computer. It may happen in the next two or three years, in fact, and Apple might well end up discontinuing all of its desktops except perhaps the Mac Pro for users who still crave the ultimate in processing power regardless of cost.

The critics and far too many tech companies don’t see the benefits of long-term strategy, however. They are always focusing on the current quarter and perhaps the next, without seeing the larger picture. Here’s where Apple has a demonstrated advantage. Aside from the note-book price cuts earlier this year, which doesn’t seem to have seriously hurt their profit margins, Apple didn’t pay much heed to the current global economic situation. Instead, they say they plan to continue to innovate their way out of the recession, which is something that the competition fails to realize.

All the good news from Apple comes at an interesting time. Microsoft is still reeling from the failure of its Sidekick servers, where an untold number of customers of this fashionable but low-selling smartphone lost all their data as a result of that notorious server outage. Officially, T-Mobile is now telling customers that they have deployed a recovery tool at their Web site to help you recover your stuff. How successful this scheme will be in the real world is anyone’s guess. After all the aggravation customers suffered, even if all or most of the lost data is restored, it won’t be much compensation for folks who endured days and days of agony wondering if anything would ever be recovered.

In any case, Microsoft is still moving full steam towards this week’s rollout of Windows 7. There are those silly house parties, ads showing that six-year-old girls love the new operating system, and lots and lots of hype. Indeed, Windows 7 has gotten some pretty good reviews too, even though it may well be that some of the compliments we made simply because it’s not Vista. But at the end of the day, and despite the fake impressions created by Microsoft and its legions of fellow travelers, Microsoft’s “System 7” is not all new, nor anything close to a major upgrade.

In fact, it’s largely a cleanup of Vista, with some visual eye candy to convey the impression of major change. This is much the same scheme that Microsoft has traditionally employed with other products and services. Take a shave and a haircut and devise a new name, and try to convince people that everything has changed. The same stunt was pulled with their search engine, rebranded as Bing, but still no more successful in grabbing market share against Google than its predecessor — whatever that was called.

As I write this, Apple’s market cap has exceeded that of Google. If the stock price keeps soaring I can foresee the day when they beat Microsoft too. From crazy Steve Ballmer’s standpoint, that would be the unkindest cut of all.

Confounding once again the frequent speculation about additional price cuts for Apple gear, the latest Mac refresh keeps prices pretty much the same as the previous models. But that’s where the resemblance ends.

All right, the $599 and $799 Mac mini receive at best modest speed bumps. However, one of the seldom-mentioned uses for this diminutive computer is in the server industry. Apple has finally accepted that reality, by offering a $999 model equipped with two 500GB hard drives and Mac OS X Server. No, we’re not switching yet, since our server has dual quad-core Xeons, but certainly there are lots of applications for cheap servers, and the Mac mini is actually more powerful than many of the boxes Web hosts routinely deploy even now, and putting a bunch of them in a server room might be a great way to save money for some businesses and educational institutions.

The MacBook is still white and the price remains $999, but that’s pretty much where the resemblance ends. The slimmer polycarbonate unibody form factor follows the tradition of the MacBook Pro. It also sports an LED backlit display and a built-in battery that’s rated up to seven hours between charges.

Apple has added a non-skid bottom surface and shaved the weight to just 4.7 pounds, putting it to within a pound or so of some of those so-called “thin and light” portables. It might have been better to see a lower price, but certainly the improvements add $100 to $200 in the value equation.

The skeptics, naturally, will suggest that economically challenged customers might still prefer a $699 PC note-book, and perhaps some will. But when you compare Mac versus PC pricing, you have to consider the actual features, not just the dollars and cents. The latter is where Microsoft’s Laptop Hunter ads fail miserably.

Moving up the ladder, the entry-level iMac is still $1,199, but again there’s a whole lot more bang for the buck. Instead of offering 20-inch and 24-inch models, for example, they’re now up to 21.5 and 27 inches. Oh well, not the cherished 30-inch display some of us had hoped for, but surely it’s close enough not to be significant for most of you, particularly considering that the larger model begins at $1,699.

In addition to the usual spate of speedier processors, there are now four memory slots, meaning you can add up to 16GB of RAM based on the existing maximum density of 4GB for each module. Of course, those suckers are expensive, so most of you will stick with the standard total of 4GB for now until the third-party memory houses bring the costs down to a sensible level.

In addition to greater memory capacity, those who craved for a bridge between the Mac mini and Mac Pro have it in the form of the 2.66GHz quad-core Intel Core i5 processor, which is standard on the $1,999 27-inch configuration. A $200 upgrade gets you the 2.8GHz quad-core Intel Core i7 version. I wonder how long it’ll take before a MacBook Pro configuration offers a quad-core configuration, assuming it doesn’t degrade battery life seriously.

You see, when it comes to energy conservation, it does appear Apple is more concerned than the PC makers who will put anyone into a note-book chassis so long as there’s a waiting customer, regardless of the tradeoffs. Besides, it’ll still be a while before a decent number of applications supporting Snow Leopard’s Grand Central Dispatch feature, for improved multicore support, are available. So going from two to four cores right now will have, at best, minimal impact, and it’s probably not worth the money.

Other than the lack of a lower price, the rumor sites weren’t far off the mark. They also had the fundamentals down with the replacement for Apple’s pathetic Mighty Mouse. The new, ultra-slim Bluetooth Magic Mouse comes standard on the iMac, and will also be available as a standalone product for $69.

The Magic Mouse’s stock in trade is support for Multi-Touch, which will reportedly allow you to use gestures to scroll through long documents and images, in the same fashion as the enhanced trackpad on the latest Apple note-books. Don’t sell this capability short, because I have come to depend heavily on finger scrolling on my 17-inch MacBook Pro, and that’s actually one of the Early 2008 models. It’s even better on the glass touchpads featured on the current product line.

Keeping with the “quiet upgrade” tradition, Apple’s Wi-Fi products, the AirPort Express and Time Capsule, were reinvigorated with speedier Wi-Fi capability, and the latter supposedly offers improved performance with Time Capsule backups. This comes at a peculiar time for me, as I just spent 30 days evaluating the older 2TB TIme Capsule, so now I have to get a replacement unit from Apple before I do the writeup.

The Apple Remote was also replaced with an upgraded, slimline aluminum form factor somewhat reminiscent of the iPod nano. But it’s still not standard on any Mac and it’s still $19 if you care.

All in all, there’s probably nothing earth shattering in all these product revisions. I was hoping for some price cuts, but since you get a whole lot more for what you do spend, maybe that’ll make the difference for the holiday season. Certainly Apple’s projections for reduced profit margins this quarter do, in part, reflect the fact that they are paying more for this gear even if you’re not.

Well, folks, Apple did it all over again. They confounded those alleged Wall Street analysts by beating the street and pretty much disproving any lingering skepticism about their ongoing success.

Here’s what I mean: Sales estimates for new Macs were as high as 2.85 million for the last quarter, but Apple sold 3.0.5 million, breaking another company record. Where the skeptics suggested that iPhone sales would be considerably lower than expected, because of supply constraints, Apple actually moved 7.4 million, a seven percent growth over last year.

Well, in the latter case, the critics were partly right. During the quarterly phone call with analysts, Apple admitted there were problems meeting demand, which they claim to have largely resolved earlier this month. So that surely augers well for the current quarter.

All in all, Apple’s sales totaled $9.87 billion with profits of $1.67 billion or $1.82 per diluted share for the quarter, which actually ended September 26th. Last year, sales for the comparable period were $7.9 billon, with profits of $1.14 billion or $1.26 per diluted share.

Not everything came up roses, however. Sales of desktop Macs continue to shrink compared to note-books. Some 787,000 desktops were sold, a 16 percent decline in unit sales. Portable sales soared 35 percent. However, other PC makers are suffering from the same problems, as sales trend portable. Worse, those companies are finding most of those increases are confined to the low-profit netbook category.

Apple, at least for now, still hasn’t announced any intention of entering the cheap note-book category. Even the reports of a tablet-based computer speak of something that will cost more than twice what the base-level netback sells for. In any case, I don’t think anyone expects such an animal to emerge from Apple’s contract production facilities until some time in 2010.

As to operating systems: In the first five weeks on sale, Snow Leopard is shipping at twice the pace of Leopard. Apple claims demand is actually higher than they expected, which might be true considering the 10.6 upgrade is not feature rich. On the other hand, $29 is surely a cheap price to pay and the upgrade process, particularly compared to the Windows XP to 7 mess, is almost seamless.

The iPod continues to command over 70% of the U.S. market, but sales were held to 10.4 million units, an eight percent decline compared to last year. Once again, though, even the skeptics agree that some of the lost sales are simply going to the iPhone. So long as Apple continues to cannibalize itself, few will complain. Well, maybe Microsoft, since their Zune HD is off to a typically lackluster beginning, at least based on sales rankings at Amazon.

With the Windows 7 coming out party happening later this week, I wonder if anyone truly believes that’ll change anything when it comes to Apple’s ongoing market share increases. You see, with every previous Windows release, Mac sales have actually increased. Again, that’s contrary to what the analysts want you to believe. What’s more, you can bet that Apple will go after Microsoft’s horrendous XP upgrade process.

As most of you no doubt expected, the session with financial analysts produced the typical softball questions. Maybe they hold back because they don’t expect Apple to accept the difficult queries, or they lack the journalistic chops to probe. So as you might expect, folks, Apple wasn’t asked about the infamous Snow Leopard Guest account bug, which may soon be resolved anyway in the next 10.6 maintenance release.

Now it’s not our habit to simply repeat an Apple release and quote lots and lots of numbers. If you are interested in probing the figures more carefully, feel free to check Apple’s press release on the subject for all the information you need to get the sense of their performance in the last quarter.

Meantime, while Apple remains coy when they’re asked about anything that might give a clue about new products, a response from Chief Financial Officer Peter Oppenheimer provides a strong hint, when he explains that profit margins are about to decrease in part because of “new products we have and will announce, delivering greater value, lower gross margin than predecessors.”

Update: Apple’s product updates occurred without fanfare Tuesday morning. First, to recap the speculation: The aging MacBook might be replaced with a slimmer form factor, accompanied by a price cut ranging from $200 to $300. The iMac may also be trimmed down somewhat, to take advantage of ongoing parts miniaturization. Some are actually hoping that Apple will install the low-power quad-core Intel processors on some models, and perhaps provide a little more external expandability to satisfy the needs of folks who find the Mac Pro to be much too expensive. The Mac mini? If it gets an update, it’ll probably be minor, although it would be nice to see a small price cut to pull in extra sales from skeptical buyers who continue to suffer from financial distress as the holiday season approaches.

In the end there were no price cuts, but every upgraded product offers more value for the money. We’ll cover this in more detail in a separate article.