What does Steve Jobs give in return for the hundreds of thousands of Apple fanboys who lined up and bought the iPhone eleven weeks ago? A $200 price cut to those who didn’t fall in line. Now, that’s a PR disaster Apple didn’t expect from yesterday’s announcement.
Last June, Apple first introduced the iPhone at $599 for the 8GB model. Yesterday, Steve Jobs announced it’s going to discontinue the 4GB $499 model and the 8GB is cut down to $399. In just over 2 months, Apple dropped the iPhone price by almost 33%.
A lot of the people who lined up for hours last June felt betrayed despite their loyalty to Apple. Apple’s stock fell 5% on Wednesday and another 1.6% on Thursday to close at $134.63. Steve himself got hundreds of emails from customers who were obviously upset about the recent announcement.
I am sure that we are making the correct decision to lower the price of the 8GB iPhone from $599 to $399, and that now is the right time to do it. iPhone is a breakthrough product, and we have the chance to ‘go for it’ this holiday season. iPhone is so far ahead of the competition, and now it will be affordable by even more customers. It benefits both Apple and every iPhone user to get as many new customers as possible in the iPhone ‘tent’. We strongly believe the $399 price will help us do just that this holiday season.
I think spareparts for the iPhone didn’t just drop dramatically to warrant a $200 price cut. This means that when Apple announced the iPhone last June, it already knew it will be going for the $399 price after the initial $599. It is also possible that the iPhone sales didn’t meet Steve’s expectations and in order to reach their 1 Million target by December, they had to dramatically lower the retail price to push more sales of the unit. To think Apple is also getting 10% of all fees charged by AT&T to all iPhone subscribers, an arrangement/leverage no other cellphone manufacturer had in recent history.
Steve Jobs had to apologize and offered rebates to all previous iPhone owners:
Therefore, we have decided to offer every iPhone customer who purchased an iPhone from either Apple or AT&T, and who is not receiving a rebate or any other consideration, a $100 store credit towards the purchase of any product at an Apple Retail Store or the Apple Online Store. Details are still being worked out and will be posted on Apple’s website next week. Stay tuned.
That, plus some $7 drop from the stock price has gotta hurt.