“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 bought an iPhone the first day and I have no buyer’s remorse about the new lower price. But, a lot of people are pissed, including some of my family members with iPhones. Apple really needs to do something to quell the disgruntled or many people will hesitate to buy Apple’s next great product for the first 9 weeks after it is released.
My general reaction to the big price cut after only 9 weeks can best be expresses with a simple: WTF? Apple never does this kind thing, especially when the thing is selling like hotcakes. But then again, I bought the first Mac in 1984, within days of its release. The price was so high, however, that not enough other people bought the first Macs. Instead, they bought cheaper IBM-PCs with DOS. Apple let the market get away when their product was so new and innovative that the market was theirs for the taking. I suspect Jobs is not going to repeat that mistake. He knows he has a white hot product and he wants to absolutely crush the competition before they even have a chance to offer alternatives. It is a great strategy by Apple, but they shouldn’t leave their early adopters feeling screwed in the process.
If you are upset, write to Apple and express your feelings (http://www.apple.com/feedback/). Maybe they will make amends so people don’t think they are dealing with Microsoft.
I believe that the sails are faster than Steve expected. NOT slower.
As I said in response to Steve Jack:
If I had a product that took me years to make, lots of money spent in development, and it was an absolutely new thing that would be impossible to predict how good it would sell…
I would want to have a bigger margin at the outset.
I think the iPhones that were built in June sold out too soon. That couldn’t be more reassuring. Now, the material prices for the same technology must have gone down a little. And there are new iPods that steal some of the thunder from the iPhone.
It makes perfect sense from a business perspective to slash the price to a less “anxious” price point that can compete with Apple’s own iPod touch.
Add to this that the iPod touch will be sold internationally months before the iPhone can become available. It will also sell to those who are locked in with non-AT&T;carriers and with those that have a tighter budget in the US. This is essentially going to be publicity for the iPhone. People are more likely to call it “phone-less iPhone” than “iPod touch”.
Anticipation for the iPhone internationally, and immediate acceptance once it is released can only get better this way.
Then comes the technical issue of 3G and battery life, which would mean that the next batch of iPhone, especially those sold internationally, will have more expensive components.
So I would expect an 8G and a 16G iPhone with 3G capability to be released by the end of the year. The price points would have to be below the $600 mark. So if the “more-expensive-to-make” 8G model stays at $399, and the 16G goes for $599, it would be extremely reasonable pricing.
All this while maintaining at least 25% margins. This is how it should be in my opinion.
I would clearly feel the punch if it was me buying the iPhone yesterday. But if I was selling it, I think I would do exactly what SJ did if sales were so good upon rolling out a new product.
So is the 4GB iPhone EOL’d?
to ripped rag and others.
if it’s been less than 14 days you can get your money back or store credit. it’s been part of apple policy for years.
but honestly, i have never seen Apple betray the early adopters so quickly and so mercilessly.
Anyone else here remember the Mac IIvx? A bigger shafting than this iPhone price change.
@Brau
“So, 1 million in 2 months adds up to 10 million in a year? Interesting math”
What the hell are you talking about? The 10 million dollar mark was expected to be reached by the end of 2008. Go back and watch the Keynote.
Apple should reimburse everyone who paid the premium, overinflated price! Huge miscue by Apple who is certain to disenfranchise hundreds of thousands by this move. I, for one, am ticked at paying the extra $200. Had I known, I would have waited to buy. This was unforseeable. I hope Apple is chastized thoroughly in the press for this. It’s unforgivable!
I’m so glad I bought my 8gb less than 10 days ago.. PRICE MATCH GUARANTEE! I’ll be receiving my $200 credit in the Apple Store tomorrow afternoon!
@ qka,
Hold your tongue mate, everyone knows that it isn’t a shafting if it comes from Apple. Apple doesn’t do anything wrong…ever.
Don’t cry. $599 seemed like a lot… but you PAID it, right?
You whined about the supposedly high price… but you PAID it, right?
Now the price drops 30% and you’re whining about that, too! Give me a fucking break! EVERY tech item you buy either drops in price, is obsolete or both the second you open the box.
THIS move is ALL about market share!
MORE people buy iPhones and get a BIG taste of the Macintosh experience. They tell their friends… MORE iPhones, MORE iPods and MORE Macs sold! It’s all a good thing.
Been a iPhone owner for 19 days.
… and stopped recommending Apple to anyone today.
That’s just how abusing customers works.
Belly-achin’? Well… maybe.
Lost sales for Apple? DEFINITELY.
All my Apple purchases are on cancelled. Won’t be recommending Apple for a while.
The real reason Apple does this sort of sh*t is its customers are pacifists. Sell ’em something shiny and you can screw them over, control them, steal from them.
When Aperture dropped $200, Apple offered a $200 coupon good in the Apple store (online and physical). Maybe that’s what will happen here.
The real question is…was the iPhone over priced to begin with? Most in the press said yes.
Many on here said it wasn’t expensive enough for what you get. Apparently Steve didn’t agree with you.
A 33% drop in just nine weeks for an entirely new product that we’re told is selling phenomenally is unusual. How long did it take for the iPod or any other Apple product to get a price reduction?
Normally, Apple just gives you a better second or third gen for the same amount.
MPC Guy,
It’s called controlling the whole widget…LOL!!!!
But this is exactly why corporations don’t single source anything unless they absolutely have no choice.
Bought my 4gb iPhone about 7 days after it launched.
Absolutely love it! I have been exceedingly happy with it. Everyone I meet oogles it…they all ask to touch it and ooh and ahh. So my smug quota is met.
I’m keeping a positive attitude. Now I have a collector’s item in my pocket.
I gotta admit, I was surprised by the price drop.
I have to admit, I’ve been curious about how well the iPhone has been selling after it’s initial outstanding weekend. From the sounds of it, it hasn’t been selling all that well if Apple had to drop the price. Especially when you figure that, with the price drop, Apple considers themselves to be “On Target” to hit 1,000,000 phones sold by the end of September.
For $599, it was too pricey (at least until they had an SDK). At $399, I’m far more tempted to buy one and wait until Apple has an SDK.
I think Apple smells blood in the phone arena. And they made an excellent move. Get their iPhones in hands of people before any competition comes. All these knock offs from Nokia, and others, won’t be here for a while. Apple has a good couple of months to really get people to buy them.
For the price cuts, eh, it’s technology. I don’t regret buying my 8 gig iPhone at all. I just wish I could get rid of my Treo 650……..
The guy I feel sorry for is my friend who has been drooling over an iPhone, but couldn’t justify the price. He just bought a Blackberry and was still having problems getting it to sync with his Mac. Hopefully he can return it and get the iPhone instead.
I’m disappointed that I spend an extra $200 for my iPhone. I had debated about waiting until around Christmas for it, but decided to get one instead. New technology drops in price quickly, but this was surprising.
@MPC Guy
I think we’ve talked before, so I know you’re not stupid.
But I’m sure Apple won’t worry about missing you with the 10 people this price drop will ADD to their sales.
It’s capitalism.
Good will is terrific, but it doesn’t mean squat to the shareholders.
MDN: “…Apple going to sell a ton of iPhones..”
1 ton = 1000kg; iPhone weight = 135g => 7408 iPhones
Apple needs to sell more than a ton of i phones to meet their goals.
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For goodnes sakes, I don’t know what they were smoking when they thought to sell 10 mio. iphones in less than a year for 500+ bucks a pop.
maybe I remember the Keynote an MWSF incorrectly, but I believe that I heard the claim of 10 million unit sales by the END OF 2008. This would make the period 18 months to sell 10 million phones, or somewhat more than half a million a month. Apple is looking like they’ll make 350,000 or so a month so they might be coming in just a little short, hence a kick in the backside for sales.
Besides, one model of iPhone can’t stand by itself. It’s gotta have upgrades, it needs CDMA to work in Japan, it’ll eventually need 3G, especially in places where 3G is well deployed. There’s gotta be slots to slip in more capable phones at higher prices. It looks like Apple is heading toward making the CURRENT iPhone the low end model instead of making a stripped down “iPhone nano”
Last time there was a price drop on one section of a product line was when Apple dropped the 5G iPod price by $50 (if I remember correctly) days before the Zune was released, causing MS and Toshiba massive headaches and zero profitability. Maybe Apple knows of a new Zune/Nokia/Sony, etc phone due for imminent launch.
I want my iPhone too so that I can star whining!
Damn it!
Apple is gaining volume production and is interested in axing the use of hacking. If you lower the price you nix it and get the profit from the monthly fee. It is cheaper than throwing patches and other updates.
Plus all the other phones coming out will have to face increased pressure at millions of units flood the market. That will put a bullet in the Zune, since it must further cut profit and make more lose in MS bottom line. May force them out of the mainstream even further.
Smart move if you ask me and I feel no such ill feelings from the price cut. I purchased the first day and will keep this phone as a moment when the phone industry changed!
It’s obvious. The price drop is designed to make potential buyers of the iPodtouch to think about upgrading to the iPhone. iPod prices were set way before the iPhone. The iPodtouch has to be priced higher than the iPod video but not so high as to make the additional Wifi capabilities and touch interface seem too expensive. The price difference of $100 to add phone capability is perfectly reasonable.
If anything, this new pricing should make us wonder about how much $$ AAPL makes off of the ATT contracts. I bet the iPodtouch has low margins, but the added revenue of people switching to a high margin iPhone for just $100 will make it a wash.