“The Cupertino, Calif., company said it would cut the price of the 8-gigabyte iPhone to $399 from $599 – an acknowledgment that the company overreached when it launched the phone just over two months ago. Investors sent the company’s shares down 5% on the news,” Cheng and Charny report. “‘Consumers had been priced out of the iPhone,’ said Trip Chowdhry, an analyst at Global Equities Research. ‘At the old price levels, they couldn’t hit their targets.'”
MacDailyNews Take: Apple is on track to hit their publicly-stated target of 1 million units sold by September’s end. The question is whether Apple is being very aggressive to get even more sales or were they not meeting unstated, internal goals? One thing’s for sure: Apple going to sell a ton of iPhones.
“‘We’re going to get even more aggressive,’ Jobs said during a company event on Wednesday in San Francisco. ‘We’re going to get even more aggressive. The customer satisfaction is off the charts,'” Cheng and Charny report.
“Questions about its high price have dogged the iPhone since its launch. While sales have been strong – the company said it is on track to sell 1 million units by the end of the month – the potential market was limited,” Cheng and Charny report. “‘You have to speculate that even though Steve said it would sell 1 million units at the end of the month, it’s not as fast as he would like,’ said Van Baker, an analyst at research firm Gartner Inc. ‘I’m not surprised by the price cut, but I’m surprised by the magnitude.'”
“Wall Street was concerned that Apple was going too far in sacrificing margins for the sake of sales. Shares closed down 5.1% at $ 136.76, not far above the day’s lows,” Cheng and Charny report. “Baker said it will be interesting to see how the other handset makers react to the price change. The move might not win Apple any fans among existing iPhone users.”
More in the full article here.
I feel really dumb…but i guess Engadget said it best
$200 was not a bad price to pay for 2 months of smug!
But seriously though, the iPod touch is really dumb. What they should have done was just sell iPhones unbricked. That way people could quit complaining, have the same device, and eventually realize, wow, this thing would be great for a phone, and decide to activate it with At&t;to unlock all the phone features.
“CEO Steve Jobs said the company is on its way to selling 1 million iPhones in the United States by the end of September.”
Whatever happened to the goal of 1% marketshare/10 million phones? Is Apple “on track” to acheive this goal in a decade? No. Apple has dropped the price because they are not selling fast enough. The iPhone is a great advance but still falls short of what most want so they’re not buying.
I think Steve is just being aggressive, as always. And it’s going to work, too.
Not a misstep at all. Historically, Apple will lower the price on the premium version of a product right before they introduce an enhanced-feature set version at the old price point.
Look for iPhone 16GB (or something similar) real soon at the $599 price point.
Dude, that’s 1% market share by the end of NEXT fiscal year!
Maybe they overestimated but I think it has more to do with the upgrades that are on the way. Obviously there’s going to be a 16GB model soon. They can easily get another $100 for that. And they might be able to get another $100 for a 16GB 3G European spec. That puts them right back at the $600 for the flagship model but makes the entry level a little more palatable for the masses. Seems like smart marketing to me, nothing more.
With the volume expected with the iPod, Apple received deep discounts on the Flash memory costs as well as Touch components. These savings were passed onto iPhone buyers.
Apple is a company with a cult following, which advocates and even supports its products. Today they made a major move to kill the cult. Not a good strategy. Today they created 1,000,000 unhappy customers. Some will keep their mouths shut instead of advocating Apple so they won’t lose their friends. Others won’t talk about Apple because they’ve been made laughingstocks.
Cutting the price won’t move merchandise as quickly as it would if they hadn’t severely damaged their greatest assets: their customers’ goodwill.
Hey,
I paid for a week of smug. I’m okay with that. Prices go up and down. If you thought it was too much, you should have kept your money in your pocket. If $599 was okay with you then, it should be okay with you now. If it wasn’t, you shouldn’t have paid it.
It isn’t a new phenomenon to overpay for new tech. If you want to be on the bleeding edge you have to pay for the privilege. Sometimes a lot, sometimes a little. If you think $200 is a lot, you shouldn’t have bought an iPhone.
I’ll admit it stings a little, but all the oohs and aahs I got from my geek friends for the last week were easily worth $200.
on 1% market share I second Freddy the Pig.
There gonna be 16GB model at the premium price point soon. Not only that adding ring tones will be an extra money for apple.
less entry price = More iphone users = more ring tones = more revenue for apple
Great marketing strategy
“on 1% market share I second Freddy the Pig.”
So, 1 million in 2 months adds up to 10 million in a year? Interesting math.
To Rip Ragged,
I talked to two Apple employees today, one on the phone and the other by chat. After discussion, they both agreed with me, and they both promised to pass my suggested remedy to the corporate offices. One was even VERY enthusiastic about it.
To anyone who wants to whine instead of being smug – I’ve got a big ol’ hunk of cheese just waiting for ya…
Never underestimate the ability of some to take really good news and give it bad spin. This decrease in price more than offsets the penalty Verizon will charge me to switch to AT&T;. Steve just took away my remaining reason for not getting an iPhone!
Finally, I don’t feel so bad being in Canada and cursing Apple for not making the iPhone available to us, rather, Rogers for not having a data package to match it.
All the nay-sayers, like Balmer, tried to cut down the iPhone cuz of the price point… the only thing they could say was a downside about it. WELL F*%$ BALLMER NOW!
It’s an aggressive move: the money is in the Plan – not the device. (If you bought an iPhone 14 days ago you can get the difference refunded. )
There are still holes in the product line: an iPhone without internet (don’t count on it), and a large-storage capacity for the iPhone and the iPhone touch (inevitable).
How do you think those RAZR owners who paid $600 when they first came out feel? The price on the RAZR dropped almost as fast.
Nothing new to report here. It’s called the consumer electronics business. Anything you purchase will be outdated/cheaper the day after your purchase it.
I just think of that $200 as extra cash for Apple’s R&D;to create even better products in the future. Would you rather be stuck using a zune or windows mobile phone?
@Ken
Very nicely put.
Today Apple did kill my goodwill as a customer.
I won’t be waiting in line for launch day of an Apple product anymore, and I certainly don’t think that I’m alone.
If you account for the fact that it’s about to be released in Europe and Asia within the next year – then yes… I’d say the 10 mil is totally reasonable.
I feel for all you folks that feel ripped off, but on the flip side – I’m ecstatic… because I’m gettin’ me one of those babies this weekend!
well, i gotta say, the drop was shocking, but when I saw the 4gb iPhone was out for $299? I ran out and bought it.
but honestly, i have never seen Apple betray the early adopters so quickly and so mercilessly.
See what happens? Everyone complains when Apple prices to high. Now they complain when they lower prices! How can lowering the prices be a bad thing people? This is great!!!!! More people can afford the iPod and the iPhone now with even more features. This is totally absurd to be complaining about the lower prices especially knowing that all the features and more are still there.
I’m just amazed how anyone could complain!
@ Brau
“So, 1 million in 2 months adds up to 10 million in a year? Interesting math.”
Momentum, holiday buying, international sales, snowball effect… take your pick… it will happen. Look how iPod sales increased as time went by.
My take… I paid $600 day one and although it stings a bit, it doesn’t bother me all that much. Of course, I more than made that amount by purchasing stock just before the January announcement. As well, I think some others have provided some good insight here…
– 16gb/3g in next 6 months (Macworld or Europe rollout)
– Makes sense with iPod Touch intro
– The foot is in the door… let’s go for the leg
If you’re a bummed early adopter… buy some stock before it starts heading back up… it will and you’ll get your $200 back plus some.
It may be that Apple had no choice. As I understand things, this agressive price move is a twist of the knife, as it were. Other smartphones will now have to move even further down the price point ladder to stay alive past Christmas shopping season. Also, whatever the number of unhappy customers may be, it is fewer than if they had waited longer. Furthermore, the product line could do with a little less hype. Sometimes, less is more. Finally, most of the early adopters are loyal customers and will not buy products other than Apple products, especially in this case, since they have a multi-year contract.
I think this price drop was planned all along.
Today Apple did kill my goodwill as a customer.
I won’t be waiting in line for launch day of an Apple product anymore, and I certainly don’t think that I’m alone. —MikeK
Aw, quit yer bellyachin’! Rip Ragged got it exactly right. Anyone who buys new technology expecting to get a “good deal” is seriously out of touch with reality. Instead of moaning like a spoiled child, you should be grateful that you could afford to be the first kid on your block to bring home this amazing new gadget that just might change the world in its own small way.