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Live from Moscone Center with Apple
September 5, 2007
Apple CEO Steve Jobs
"We want to get even more aggressive than this," Jobs said, as he displayed the
In fairness, iPhone demand seems relatively strong. On Wednesday, Jobs renewed Apple's pledge that it will have sold 1 million iPhones by the time the current fiscal quarter ends later this month, and also noted that the customer satisfaction reports Apple has seen rated the iPhone higher than any product Apple has ever shipped. And the iPhone was the
But iSuppli estimated that only 220,000 iPhones were sold during the entire month of July. Apple reported
Of course, there's always going to be an initial drop-off in sales of a product with as much prelaunch buzz as the iPhone, but a price cut that steep coming so soon after the first iPhone hit the streets is making some analysts raise their eyebrows.
Apple did not immediately respond to a request for comment on why the company chose to make the pricing move, but Jobs put a holiday spin in the price cut.
"We want to make iPhone even more affordable for even more people this holiday season...We want to put iPhones in a lot of stockings this holiday season," Jobs said.
Roger Kay, president of Endpoint Technologies Associates, wasn't so sure Apple's primary goal was to make the holiday shopping experience a little lighter on the wallet.
"It is a very interesting sign. My first suspicion is that they aren't getting the volume," Kay said.
One source of confusion surrounding the iPhone and its sales could lie in how the numbers are calculated. Apple can count iPhones shipped to AT&T stores as sales, even before they have made their way into consumers' hands. Estimates vary depending on what point in the process the tally is made. Earlier this summer, AT&T revealed that it activated
iSuppli obtained its estimates by surveying 2 million U.S. customers and asking them whether they bought an iPhone. The market research firm actually thinks Apple is going to sell 4.5 million iPhones this year, a far greater figure than other estimates indicate.
Piper Jaffray's Gene Munster issued a research note on Tuesday, before the news of the price cut, estimating that Apple is on pace to sell about 800,000 iPhones during the quarter. Piper Jaffray reached its estimates by counting sales in Apple stores around the country and cross-referencing its data with data from PJC Wireless, which watched iPhone sales at AT&T stores.
After the news of the price cut, Munster said Apple is trying to accelerate demand among mainstream consumers who couldn't afford a $599 iPhone, and who will now snap up the device in greater numbers.
"Before the price cut, we had expected the iPhone to be mainstream by the end of (Apple's 2009 fiscal year, which will end in September of 2009); we now anticipate a steeper adoption curve earlier. The bottom line: Apple is investing iPhone profit dollars over the next few quarters in order to be a legitimate player in the phone market," Munster wrote Wednesday after Apple's announcements.
The price cut will come at a cost to Apple's overall profits. Piper Jaffray now estimates that Apple's gross margins could fall to as much as 27 percent in a worst case scenario, four percentage points off their current estimate for this current fiscal year. That might have been what Apple investors were worried about as they bailed out of the stock Wednesday following the announcement. Apple's stock started going down at around 10 a.m. PDT in the classic "sell on the news" strategy, but
It could also come at a cost to Apple's reputation among its most dedicated fans, who were
C'est la vie, said Stephen Baker of the NPD Group. "If you didn't think it was going to drop in price, you were dreaming," he said. Under Apple's returns policy, iPhone customers who made their purchases within the last 10 days can get $200 back, so long as they contact Apple within 14 business days of when their iPhone first shipped.
It's not at all clear from looking at the estimates of iPhone shipments whether the price cuts were needed to stimulate demand. Piper Jaffray's checks of Apple stores estimated that Apple sold several more iPhones per store in August during the height of the back-to-school selling season than it did in July.
But it's likely that the price cuts will stimulate demand, regardless of whether Apple was motivated by the need to jumpstart sales or the desire to reach out beyond its core group of early adopters.
CNET News.com's Michael Kanellos contributed to this report.
See more CNET content tagged:
price cut,
iSuppli Corp.,
Steve Jobs,
Apple iPhone,
Apple Computer
Apple is always accused of having small market share and not
doing more about it.
So now Apple aims for potentially HUGE market share by
aggressive pricing and people complain too?!
I guess you just can't please everybody. It seems to me that
Apple's strategy is doing quite well without these pundits, thank
you very much.
ATT is pushing their folks to sell this by giving out huge
incentives!!! Even at 299 and 399 the RAZR v9 might still sell better
then the iphone.
market and get more att people so I can talk free mobile to
mobile. They could have gotton volume without blatently profit
gouging the first buyers. They could have introduced the iphone
at $399 or they could have dropped the price like they did, but,
instead of waiting for USA today to say that Steve Jobs "skimmed
the cream from the market and then dropped prices" Steve could
have said in his keynote that he will credit his early beta testers
with a $100 or even better $200 store credit. That would have
kept me promoting Macs for years to come to everyone I see in
public with a PC like I have done for the last 20 years (even in
the 90s when everyone was running to PC because apple was
going to shut down any day) But I have such a bad feeling from
this that I have resigned as a Mac promoter and will take my
$100 retirement credit and buy a non-apple product with it.
of iPhones sold since the product's launch. I doubt Apple will
specifically detail how they do it, but it sure would be nice...
Either way, I am sure the price cut will help them catapult the one
million mark, much to the dismay of the anti-Apple people out
there.
Cheers!
Together, the iTouch and iPhone may do well, but I strongly suspect that the iTouch is going to siphon away the majority of the buyers who would otherwise buy the phone.
I'm one example. I'll be buying the iTouch shortly, but wouldn't even consider the iPhone.
What company has the equivalent of a fire sale when a product is allegedly "selling well"? Please guys.
I think the iPhone price drop is a disaster for Apple long term.
Part of the attraction to Apple products was the music-have-on-or-I-will-die fashion accessory aspect of the branding. They were expensive items, so not everyone had one and therefore became a status symbol for those who subscribe to the 'Paris Hilton school of sensibilities and self esteem'.
That's a huge market and it means you don't have to compete on features or 'value for money'. All you do is make it expensive and apply some cool trend-setter marketing.
Now that Apple is competing at a price point lower than the new Nokia n-gage series (the high end models of which hits the USA in December) they are competing on a 'value for money' front.
I can see Steve Jobs resigning soon.
want a widescreen touch iPod to keep buying the iPhone, its
price had to become more comparable.
The message is "for only a hundred bucks more you can get a
phone that does this too."
Hurts for people who paid the June 29 price. But figure this:
you guys have had a few months of "gloat value..." (And some
of you sure did use it!)
Then again, we now know that it's possible to hack the phone for other gsm networks. That might lead Apple to speed up the next gen phone.
I will wait for 2nd or 3rd gen before I even consider it.
a phone plus ipod, it's a cutting-edge portable Internet device.
Not having the current let alone future technology is a liability.
They need 3g for Europe, and here it comes.
V2 will put the price back up, but offer 3g among other
improvments, which will boost sales to hold outs like me, and
raise profit margins, which will please Wall Street, too.
I don't know if those buying the reduced price EDGE models will
be any happier than those that paid $599 last month.
support group are being deleted quickly by moderators. One of
mine was quickly deleted this eve when I tried to offer solution to
helping someone get a consideration for the price they paid on
their new iPhone.
This is the worst PR bungle in ages.
forum?
What you call a "PR bungle" is seen by people with common sense
as "clearing the trash" from the support forums.
I'd almost given up on Apple's discussion boards, once, after trying
to read through mountains of complaints of a "non technical"
nature.
What company do you know has a fire sale when a product is supposedly selling well?
The share price plummeted yesterday after the open letter from apple, admitting they tried to pull a fast one on the early adopters who paid that "stupid tax".
Jobs and company are kicking serious butt. I can't help but to
laugh all the way to the bank. I love listening to all of the sky is
falling people every day. I don't think there has ever been a
company that has been second guessed so much. No matter
what they do the experts all agree it's the wrong thing to do,
which is a sure sign that they are on the right path if you ask
me.
Not too long ago I was worried that Apple wouldn't be able to
stay in business, especially when they booted Jobs from his own
company. Boy were they idiots. Next thing you know the
company is really going no where and licencing clones. Times
were desperate and in a desperate move they hire Jobs back at
$1 a year salary. Jobs comes in pisses everybody off, stops the
clones and begins the turn around. They are on a roll and I am
riding the gravy train for at least a couple more years.
I bought the iPhone for full price and it hurts a little that they
just lowered the price, but I can see their reasoning. Let the die
hards buy it at full marked up price and then after you have sold
to all of them lower the price and get all of the fence sitters.
They will feel like they are getting a bargain (which it is). I
bought the Treo for $500 and the iPhone makes it look like a
kids toy.
Now my PC friends all call Apple the "dark side" which I take as a
total compliment.
My hat goes off to you Steve Jobs. You are the man! Now I would
be really upset if I didn't get at least a few replies from all of the
PC guys telling me what peices of crap all Apple products are
and how they are going out of business any day now, yada,
yada, yada. Apple down $7.40 today and I an still giddy and
amused all at the same time.
Muhahaha!
on hand and make rooms for the up coming 2nd Gen new iPhone
which will hit the shelf just before the Holiday shopping season!
K C
Would iPhone pricing decisions depend on how soon the GPhone is released?
Does Apple know more than GPhone rumors?
Google with other phone brands...yes.
A Google branded and developed phone OS...maybe.
A Google phone scaring the pants off SJ. No.
And most marketing strategies don't usually cut the price by $200 in the first 2-3 months.
I'd be a little ticked off if I was one of the early iPhone adopters and saw them drop the price that quick after my original purchase.
400,000 x $200 = $80,000,000
That's $80 million in pure extra profit that they made off those early adopters. Boy, doesn't that give you the nice warm fuzzies in your heart about how much Apple cares for their customers? Well, their customer's wallets, that is?
http://www.digg.com/apple/Apple_Cuts_iPhone_Price_to_399
Everyone who did this knew the price would drop, as it always
does. We also knew the first release was bound to have
production problems. Some did. We also knew that this would
not be the only future offering. All of this was discussed,
debated before hand ad nauseum.
Now here comes along an article turning the very thing many
others were waiting for into a negative spin. Seriously Krazit.
Do you hate Apple much? Or is it just your job to do these types
of stories about it. You are consistent with this type of spin.
You don't waver. But I know your memory cannot possibly be
so short as to have forgotten the CNET poll conducted on this
very topic. And the results that indicated the majority of the
purchasers were waiting for the price to come down.
A little over two months ago, you said:
"Usually all of these stories have been slanted one way, or another. But finally, someone realizes why some of us tech nuts have been so excited over this device.
Congratulations TK!"
http://news.com.com/5208-1041_3-0.html?forumID=1&threadID=28748&messageID=284421&start=-1
If only you want stories about Apple that reflect the side of the issue provided by the company and its many defenders, there are plenty of other places where you can find something that doesn't challenge your mindset.
Yes, everyone knew the price would eventually come down. But I would not be doing my job if I didn't try to explain why Apple would decide to make a price cut of that magnitude, so soon after the launch.
Negativity is where you look for it; we most certainly did not come to a negative conclusion in this article about Apple and its motives. But we didn't rule it out, either.
Really though, keep telling yourself that you knew a price cut would come in just under 70 days after hitting the market... LOL they couldn't even wait an even 3 months. If it helps you sleep it night, who am I to really question. But man, that's got to sting :D Just think, if you had waited 2½, you could have saved enough money to pay for almost 3 months of service or 200 new songs for your phone.
their price. Price drop is something that happen constantly so no real surprise
and nobody should complain.
In fact it will have happen sooner or later. What I am seeing here is that Apple
is cutting some of its profit and want to be sure that the iPhone dominate the
market before any of the competitors enter the market with a touch screen.
Kind of like the iPod, if you come too late on the market then competitors will
have hard time to grab market share in Apple's market.
So I see that move as a positive sign and show that Apple believe in their
product. They even stop the 4GB so they can be sure there is no confusion or
hesitation for potential buyer.
Steve
http://inewsonly.com
The first ZUI news aggregator for iPhone
"where did I leave that $200"
Just think it as your way of paving the road so all the other iFans and other cell-phone nuts can get one too.
something to cheer that tiny percent of the human population:
http://www.youtube.com/watch?v=xgZKjJt-TkU
EVERYONE WHO STILL WANTS ONE"
"YES!"
I'm sure there will be a point where the phone is free with a 2-3 year plan, maybe next year at this rate.
EVERYONE ELSE:
"meh"
- Positive news - Smart Business!
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by apereymer
September 6, 2007 7:48 AM PDT
- This is called "smart business"! By making a product more affordable to the public, more can be sold. Yes less profit made, but quantity increases. So in reality it may not even make a different to the profits, or in thinking positively more profits can be made since quantity is increased.
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Showing 1 of 2 pages (109 Comments)At the same time more of the public can get the new gadget!