“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.
There’s a very critical point all the whiners and moaners and complainers are missing about the dramatic price drop:
NEW FEATURES FOR IPHONE.
Your iPhone’s new features are paid for by a larger pool of subscribers. If you want your iPhone to never see new features, Apple needs fresh customers, lots and lots of them.
This was the only way to make it happen.
To those who feel ripped off. The difference is not exactly a small mortgage is it? After all. You have been the first people to enjoy a little piece of history for two months before anyone else in the USA and 4 months before Britain and gawd knows how long before the rest of the planet. You bought your iPhones right off the bat while they were still toasty warm and cooling nicely. Maybe they will be worth more up to certain serial numbers in many years to come like first edition books!!! You got yours along with the rich and famous. Don’t people pay a wedge more cash to go to a movie premiere?
I think the Dow Jones are pretty dumb dropping Apple’s share price because of this. America isn’t the whole world, but it has been a privileged test bed for the rest of the world with the iPhone. This baby is going to be better VFM on a global scale now and as long as Apple are sensible and still maintain a good margin (and you can bet it’s cheaper because of potential volume discounts on components rather than not hitting goals as Dow Jones put it) then Apple are set to make a killing in the entire mobile phone world market.
Apple often cut their prices when a new model or related product is coming out and the iPod touch is basically the iPhone sans-phone so it was inevitable that once popularity and a chunk of the initial development costs were gleaned back that the iPhone would go down in price.
Yes $200 for two months of gloating is a fair price to pay as engadget put it.
We, over in Britain, have had to wait and are still waiting for another couple of months for the iPhone and many here would pay the full original price to get one. Those complaining are like spoiled brats. Deal with it. You’ve had a 4 month privilidge over the rest of the world which is $50 a month or £25 a month. It’s peanuts!!!
And to the guy who said Apple should have just sold the iPhone unconnected and then connected it when people decided it was worth it. Dude. Engage brain before pressing submit will ya!!! I can see the reaction right now:
30% – 50% would just use a dodgy app to unlock the phone and ram their old sim card in it. The other 50% would say, that’s “bollocks pal, I’ didn’t want phone technology in my iPod and I’ll be buggered if I am paying an extra wedge of cash for those bits.” (insert your own expletives and regional dialectic terms into the last fictional quote).
The iPod touch is great. I want one, but if I get one my kids will nick it off me in a flash!
A rather envious British Mac Head who really can’t wait for his iPhone (and it had better be on O2).
So at $599 it was too expensive, but at $399 it’s too cheap. You can’t make everyone happy, I suppose…
Look. You know that Apple will still have 25% or better margin on the iPhone at $399. Plus the extra ongoing revenue from AT&T;depends on the number of iPhones sold. So any business decision that gets more iPhones into people’s hands is a good one.
The only people who have a real reason to be unhappy are Apple’s competitors, and the wireless carriers who are not AT&T;. The iPhone at $599 was dangerous. The iPhone at $399 is an unfolding disaster that will continuously undermine them for years to come. They had no answer at $599. What can they do now…?
I don’t think RIM or Palm have any worries about the iPhone price drop. As far as their key market is concerned, its well protected. Simply because the iPhone lacks access to Exchange or Corporate mail/calendering systems. No worries for them at all. Now if Apple announced ActiveSync capabilities, and other SmartPhone standard features, at 399…. those guys will be squashed like tiny little bugs.
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British Mac Head,
You cheap bastard, buy one for the kids too. Social Service will say that is cruel and may remove your children otherwise.
Hurry and apply for council residence so you can afford more Apple kit…LOL!!!
COYS!!
I’m really surprised at the posts here which are questioning the chance Apple had of selling 10 million by the end of 2008 at the old price.
Before the end of this year, the iPhone will be on sale in Europe, which has a population much greater than that of the U.S.
From the beginning of next year, the iPhone will be on sale in Asia, which has a population many times that of Europe and the U.S. combined.
Most market research organizations predicted sales of between 15 and 20 million by the end of 2008 and that was AT THE OLD PRICE.
Wake up! Some of you doubters are projecting U.S. sales on world sales!
I just bought four (4) iPhones about 3 weeks ago at an Apple store. That cost me $800.00 more than it would have today. I am very disappointed and disillusioned. A rebate of the difference, even for store credit is certainly in order. $800.00 is a huge amount of money for me.
Blah blah blah…
Apple does this every time, cut the price of something new after a short while. The stock was tanking before the announcement already as it always does.
A bunch of people talking that have no clue.
“Simply because the iPhone lacks access to Exchange or Corporate mail/calendering systems. No worries for them at all.”
Oh boy… They should be very very very afraid. Leopard server is coming within few months and it kicks Exchange server to places where it really hearts. iPhone and Leopard server will make a so powerful combination.
They should be scared like crazy. They should really hope and beg that Micro$oft buys them out. That is the only rescue.
Otherwise there is NO MERCY and I love it!
Here comes another lawsuit…….
Add this to all the guessing: Sales volumes are higher than forecast, not lower as most automatically assumed. We can afford to sacrifice some margin because we’re selling so many more iPhones than we predicted. And the lower price simply accelerates that trend.
I bought mine on June 29th. No regrets, no angst, my goodwill isn’t damaged.
The phone market is cutthroat, here today gone tomorrow, fashion business. What is hot today is dead in six months.
From my visits to the Apple store recently I saw lots of lookers at the iPhone, but not one buyer. (Me included.)
The price drop will make me reconsider…
I think the Nano is the biggest mistake.
Half-sized iPod classic with 1/20th the space? Why buy it? The slim size was the reason to buy it – the new stubby, fat shape makes little sense to the person on the go who does not need the screen.
The people who paid $600 thought the phone was worth $600.. in fact, many came on this site and argued that the price was a steal for such wondrous technology.
If you thought it was worth $600, then you paid $600. And if you didn’t think it was worth $600 you SHOULDN’T HAVE BOUGHT IT. It’s that simple. We really have become a society of entitlement. This whining and boohooing is just over the top.
Of COURSE Apple had to lower the price. They just introduced an iPod touch for $399 with 16GB. A PHONE is worth $200 more with less GB? Yeah, didn’t think so. The pricing fits into the iPod line now. For $399 I can have an iPod touch, or an iPhone, depending on my needs.
Still, the bottom line is this: IF YOU DIDN’T THINK IPHONE WAS WORTH $600, YOU SHOULDN’T HAVE BOUGHT ONE!!!!!!!
to roughly quote ChrissyOne from six months ago:
The massive shareholder selloff dropped AAPL to values not seen since… late last week.
Come on folks. This is ridiculous.
Rip Ragged, you’re so right.
If the price was good when one bought the phone, and was a fair price for the last two months, why is the former price now no good?
First, there are posts all over MDN’s comments sections that “the iPhone price is too high”, they’ll “never sell enough iPhones at that price”, “Apple is just greedy”, “I’m waiting for the price to drop before I buy an iPhone”, etc., etc., etc..
Now, we read here that people are upset, rending garments and spinning in circles, telling friends and family to avoid Apple products, and writing anti-Apple graffitti on bathroom walls, because Apple dropped the price of the iPhone.
I hope Apple ignores these illogical whiners.
I suspect that Steve Jobs already knows that the way to succeed is to NOT try to please EVERYONE.
This is a normal thing, prices are always dropped.
When I bought my 20″ iMac, it was 2 weeks before they introduced 24″ and lowered price on 20″. Well, that’s life. In today’s fast paced world of computers, you have to live with it.
Another thing, I got $200 credit after they lowered price of Aperture and guess what, it was a reason why I decided to buy that iMac, so in a way lowering price and giving credit to recent purchasers is good way to get even more business.
Steve Jobs/Apple are crazy like foxes.
You have HOW many guys sitting on the doorstep, ready to release unlock software?
Let’s drop the price, so any consumer that was on the fence over price will act. Granted, it’s still with AT&T;service, but if, by dropping the price, AT&T;will remain happy, then it’s smooth sailing for Apple. Their partner is happy, their sales are increasing per unit even if the cost per unit is going down.
Just sounds like smart marketing to me.
Many, many MANY, early adopters have warned you to wait for iPhone Rev 2
Did you listen? No. So don’t bitch now.
iPhone 2 will have more hardware features, more RAM and other tweaks as Apple responds to the market. Then it will stay like this for a good 2-4 years with little change until it grows tired and a radically new design is implemented.
iPod 1 sucked really bad.
Apple lowering the price so much on iPhone 1 also is telling us they perhaps are not doing so well in this market.
For christsake you can get phones for nearly free, the market for phones is saturated and contracts are tying people down.
Most just want a slim, cheap, low cost per month, no frills phone.
The feature rich iPhone’s biggest problem is it’s LOW MEMORY.
People HATE synching to a computer.
The iTMS on iPod and iPhone was a SMART MOVE. Remove the computer and sell the phone/iPod touch to more people, WHO HATE COMPUTERS.
Early adopters need to quit bitching. If you’re dumb enough to overpay for 1st generation hardware, you pretty much should expect this sort of thing.
Waaaahhhhhhhh!!!
The iPhone’s no longer obscenely expensive so I don’t get to feel like I’m in some sort of exclusive club!!
Wahhhhhhhhhh!!!!
I definetly feel shafted, I’ve been a big fan of Mac for a while now, and have been an advocate and actually moved people to the Mac platform, but I’ll never jump again for new technology from Apple. I don’t like feeling really really screwed, that’s why I left Microsoft in the dust.
I bought an iPod Photo when they first came out. I think the price was $599. Within just a few months later they came way down. Wasn’t that to $399 as well?
Is the a rare misstep or a tried and true formula?
The move might not win Apple any fans among existing iPhone users.
The overwhelming majority of “existing iPhone users” are already fans, so this statement rings pretty hollow.
It seems that the analysts who complained about the high price and now complaining about the low price of the iPhone. Which means the analysts are not to be trusted. Up is Down, Down is Up; they are in the society of the flat earth. Surely Apple needs to have more storage in the iPhone, and the 16 gig chips are on the way, and the 4 and 8 gig chips are inadequate. So despite a higher price, when it becomes available, the 16 will outsell the 8. Did anybody comment that the price of some of the ipods also dropped because they were not selling? If you look at the whole pod & phone product line, the price points are a good fit. Apple stock will go up, but what will happen to the “smart” phone people? The market will sort this out, and Apple will sell iPhones and build its market share very quickly at the reduced price, while still making an excellent margin. But the big point is the pod line is ready for the Christmas season. Holidays come in the summer for most people, here in northern bear country.
Sign this!
http://www.ipetitions.com/petition/appleiphuckedme/index.html
The real mistake Apple made was in pricing iPhone so high. Some bean counter and some markting person thought they could charge a premium for this cool new technology. Well, they could and they did.
But the problem was that the initial pricing was too high for most consumers.
This price reduction corrects that mistake, opening the door for far more consumers to consider purchasing the device.
It also reduces or eliminates a sales objection to the enterprise market. (Yes, I know. Reducing the price is necessary, but not sufficient, to cater to the enterprise crowd.)
But by far the most important and strategic reason Apple reduced iPhone prices – and introduced the iPod touch – is that Apple wants to replicate its success with music in video.
The reason iTunes is so successful at selling music is because the iPod is the de facto standard for portable music players. This gives Apple a large amount of leverage when it negotiates with the record labels and other music industry players.
However, Apple has very little leverage with video and media content companies (except perhaps Disney, where Steve Jobs is a director).
The reason NBC and others can walk away from iTunes (and woo Amazon instead), is because they can afford to. Apple is simply not dominant in the (previously non-existent) portable video player market.
So by reducing prices and introducing the iPod touch, Apple at a stroke increases vastly the potential installed base of Apple-badged portable video-capable platforms.
Now do you see why Apple dropped iPhone prices two months after its introduction? Apple is setting the stage for dominating the portable video player market. And that in turn will ensure that no media or content company will be able to walk out on Apple again.
From here, the risks for Apple is execution, execution, execution. But this is where Apple excels – Apple is its own best competitor, routinely destroying a successful product by deploying an even more attractive and successful product. And the large memory and component purchases ensure Apple can deliver high value product at prices few competitors can match.
Current shareholders long on AAPL should consider this news a strong positive for the medium and long term. Ride out the short term share weakness.
For those considering entering AAPL long, give the market some time to digest yesterday’s announcements. Look to start scaling into a longterm position over the course of September (the markets are routinely weak during September, historically). Or you can wait until October, when new money seasonally comes into the market, plus there will be the catalysts of Apple’s quarterly report on Oct 18th and the release of Leopard.