“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.
Has anyone considered that AT&T;might be kicking in more bucks to Apple for the iPhone as about 25% of iPhone customers are new AT&T;customers?
The misstep was not dropping the original price, say, the week or even day before launch. I think component costs came down a great deal between announcement and launch. And since Apple is accounting for the devices on a subscription basis, the extra $200 hasn’t even had a material impact on financials.
The ipod line has always had an inevitable drift to sub $400 prices. Remember the original video ipod started at $599.
I’d feel bad if I’d spent the extra $200. OTOH, Apple’s willingness to cut prices is a big part of the ipods success.
And hey at least you didn’t spent an extra $249 on the Zune!!! Or an extra $200,000 on your house…
my aapl shares took yet another dump following a mac press event.
JAYZUS CRHAAAAAAST!
One more point: When you listen to the complaints and see petition drives, etc, just remember that these are irrelevant.
Why? For two reasons:
1. Because the number of customers pissed off at Apple’s price reductions is, from Apple’s own sales data and projections, limited to less than one million.
2. The pool of potential customers who previously wouldn’t consider the iPhone, but who now will after the price reductions, is much larger than that – perhaps millions more.
So Apple can easily afford to take a one-time hit among early adopters, in exchange for a appealing to a much larger potential customer base. And given the strategic imperatives vis a vis video dominance I discussed above, reducing the iPhone prices now makes a lot a sense.
It’s tough to understand the complaints of “being screwed by the price drop” when it comes to the purchase of an unnecessary luxury item; albeit one that was worth the “cool” factor.
Being screwed is more applicable when you have little-to-no choice in the purchase decision — gasoline, electricity, food, water, housing — that sort of stuff. And even then, you still have options that affect the cost.
I submit that we accepted the initial high price (grudgingly or otherwise) because we wanted the cool item and had decided that the likelyhood that any price reductions would be a while into the future (perhaps after Christmas) and be a nominal amount (perhaps $50). We hoped that the “Generation 1” device didn’t have any fatal flaws. Under those conditions, we decided it was an acceptable price to pay to be an early adopter, to bask in the glow of all we met.
Well, we guessed wrong about the time until the first price drop and the amount of it. Guessing wrong is part and parcel with speculation — we are “screwed” less than the folks that schemed to purchase multiple iPhones when the were first introduced so they could make big profits on eBay. They guessed wrong and paid the price, but at least they had the balls to actually try and make a go of something.
Membership in the exclusive “cool club” just got easier. Be satisfied with being among the first to have a really useful phone and an icon of our age and quit bitching about how “now they’ll let anyone join” and how your status has been diminished.
For all you people bitching about being early adopters and saying things like “Apple never does this kind of thing” you are completely and totally mistaken.
Remember when the iPod photo came out, the 60 gig model??? When it first came out it was $600. Then in 2.5 months it came down to $400 dollars.
Pay attention people. The same with your mortgages!! pay attention to what you are signing.
Bitch, moan, cry… come on you were the first to have it, so there!! haha
“Today they created 1,000,000 unhappy customers.”
no.
i know 4 iPhone users. the strongest reaction was that one said “bummer.”
they all agree it was worth every penny for those 2 months.
so saying every person who bought a phone is going to be mad is clearly BS.
MW: you are using “bad” logic.
With Apple now launching an iPod touch, and the iPod nano, a few things are reaching large economies of scale for Apple – memory and screens.
The touch uses the same screen as the iPhone, and both the touch, iPhone and nano use an 8 GB NAND flash memory fill. The touch and nano will deliver huge buying power to Apple, and thus Apple is very likely to squeeze out healthy margins on the $399 iPhone, even though they have lowered the price $200
“Apple is on track to hit their publicly-stated target of 1 million units sold by September’s end.”
Who’s your source, MDN?
Those people complaining about a LOSS of $200 is complete crap.
The iPhone is the best phone on the market at any price – today you can buy one for $399.
Yuo will only lose $200 if you sold your iPhone today, and what could you replace it with…. only another iPhone comes close.
In fact, it’ll probably be 2 years before anyone else has a phone that comes close to what iPhone can do, so you have to write down your depreciation over the time you intend to have it. Couple that with the price plan you have over 2 years, and the percentage difference in cost of ownership between an ealier adopter iPhone, and one as priced tro day is very little.
Quit whining and be grateful that you could afford the worlds greatest phone, that on release day, everyone was hailing as the best value smartphone on the market (which is now even better value).
This is a GOOD news day
Was anyone paying attention when Jobs announced the iPhone? Anyone at all? He said they intended to cut the price as quickly as they could.
Add the fact that every competitor was selling against the iPhone’s price, and the motivation is clear: give them nothing to sell against. Now the iPhone is cheap compared to most of it’s crappy competition.
And to the whiners who are complaining about having paid more: GROW UP! You wanted to be first on the block, and you knew that if you waited the price would come down.
Some of you are so friggin’ stupid!
The goal of 10 millions is BY THE END OF 2008!!! NOT 2007!!!
And however many iPhones a month they’re selling NOW is irrelevant. They haven’t gone international yet.
Do you understand this?
Sheesh!
One again, Wall Street analysts are looking at short-term profitability rather than long-term strategy. Twits.
A chicken in every pot – an iPhone in every pocket.
Again, using the hockey analogy, Apple skates to where the puck will be, not where it was. I’m not surprised by the cut, or the amount, just how soon.
Is this a rare mis-step, or is Apple just skating hard, fast, and far to where the puck is going?
Consider the average pro rated cost of terminating a cell phone contract early. Let me just pick a number, say $178. Hmm, if I want to get an iPhone 8 gig, thats $600, plus $178 to kill the old contract. NOW with the $400 pricing, I actually save $21 to make the switch, compared to the price on Tuesday.
So where is the puck going? Huge holiday consumer sales of less expensive iPhones? sure. Huge after Christmas sales to enterprise because of integration with existing MS exchange anal apologists (via software firmware updates) , and perhaps new features, integration and services in Leopard server? I sure hope so.
Maybe Apple is just worried because they set the goal of 10 million phones (1% market share) by the end of 2008, and the anal-istas are saying it will be 2.5 – 3 times that much, and are trying to meet/ beat those expectations to protect stock value.
Or is Apple just trying to bury the so called smart phones and create their own catagory by removing the price barrier. After all, in July they outsold every other smart phone handset on the market. Maybe for Oct/Nov/Dec quarter they want to outsell every other smartphone model/ makers’ combined sales?
Whatever is happening, us mere mortals may not see it coming, but I’m glad that Apple has an idea, and is headed in that direction.
“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.””
BREAKING NEWS. Buy your new car in Aug, pay new car price, but it in Sept-Oct, get a huge break. WISE UP. (Plus, people are saying that there is a 14 day grace period ?? )
Its easy to double think what Apple should do. Maybe just sell the company and give the money back to the shareholders???
” width=”19″ height=”19″ alt=”grin” style=”border:0;” /> And maybe not!!!
Like one guy here reminded us. Apple skates to where the puck will be!!! We do not see the international market and multi- product competitors, we just see out side our window. Its a complex world out there. And for all that I have just one thing to say:
S—W—E—-E—T ! ! ! Am I ever going to be buying some Apple products this christmas. BIG TIME.
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My only complaint. Why, oh why, did I not buy Apple stock at 50$ like I had planned. 🙁
en
iPhone needs 32Gig capacity to properly combine a video capable device with a phone. Ipods with more than 32Gig aren’t adding to useful watching on a trip ( battery life 7hrs) its just adding to bulk storage capacity.
$600 with 32Gig – and the same with the touch and you then have a complete winner.
I’ve owned Apple products since the company was founded and have been diehard fan. That is, until now. I am extremely disappointed (actually, I’m angry) at this marketing tactic and feel Apple needs to compensate in some way those of us who trusted them to deliver a quality product (which the iPhone is) and trusted them to stick by their guns on the price for much longer than the three months the phone has been sold. Sure, we’ve been able to use the phone for three months. And sure, one expects price cuts on products. But this price cut comes way too soon. There are many things Apple can do to thank those of us who were early purchasers. One would be to offer $200 worth of coupons for future Apple Store purchases. Another would be to get AT&T;Wireless to provide 10 months of the $20 data service at no charge. Another would be to make the phone even more valuable by adding software that would allow it to reverse-synch to our Macs, effectively turning the iPhone into a modem that will allow us to use the Edge network instead of subscribing to Verizon’s or Comcast’s or AT&T;’s broadband services. In short, Apple needs to do something very special to thank their loyal customers for believing in them and their products. I hope the Apple folks are reading this and other comments and I hope you’ll make sure they do by sending our comments directly to Steve Jobs. You have my permission to do so with my comments. I would love to love Apple again as much as I have for many, many years. Thanks for giving me the opportunity to comment. Tom Engleman.
If Apple had announced a ‘speed bump’ upgrade ie the 4Gig now had 8 and the 8Gig now had 16, nobody would be bitching – that’s just what happens in Apple produce life cycles – it’s because they didn’t announce an equally expensive top model that everyone now feels somehow cheated.
When the iMac went from 80gig HD to 160 Gig – were there protests in the street ? – No.
“Been a iPhone owner for 19 days.
… and stopped recommending Apple to anyone today.
That’s just how abusing customers works.
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.”
You’re retarded if you really believe any of this.
This is such a funny thread. Dozens of people put forward their outstanding cases for why early adopters should not feel shafted…but early adopters keep adding their same whining posts as if they didn’t read anything prior to posting.
Grow up already, early adopters! Take some responsiblity for you own decisions or go back to Microsoft crap if you think that’s so much better. I waited in line for hours, got the 25th iPhone sold in my state. I still LOVE Apple and will continue telling the world how great Apple is!
A price drop of $200 make me think only one thing….We gonna see pretty soon the second generation of iPhones, probably couples weeks before christmas. Bigger storage and more features….so get ready and start to save money.
I find it amusing that they think the share drop is because of the fear of reduced margins and therefore reduced profits, or that there is some kind of deep analysis required concerning the drop.
Correct me if I am wrong, but Apple’s shares have ALWAYS dropped after product announcements, regardless of the pricing.
It’s profit taking on the share increase that happens with in tandem with the expectations. I would think anyone who watches Apple stock can predict this like clockwork.
so who knows where all of the now discontinued 5th gen 30 gig videos that are still in stock will be sold and for how much? no one is gonna pay $249 for it anymore when you can get a new 80 gig classic for same price. would be perfect to use while i am here in iraq and not have to worry about losing out too much if it breaks from the conditions over here.