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Seems strange that they're releasing new Macbook pros now we now that they'll be legacy products with the Macbook neos.

Macbook neo is most probably a cheap low end laptop, or a very small laptop. (with rumors that it uses A-series processors)

It's not competing with Macbook pros which are the top line for laptop power users.

No, if you name your product literally Neo, you're indicating it's the latest and greatest, it will clearly have better specs than the pro.