iPhone Price Cuts. iPhone reduces its price by $200
SAN FRANCISCO (AP) — Apple Inc. slashed the price of the top iPhone by $200 Wednesday to bolster holiday sales, but also angered loyal customers who paid top dollar in the gadget's first 10 weeks on the market.
The company also revamped its iPod media player lineup, introducing a model called iPod Touch that incorporates the iPhone's touch-screen and adds the ability to wirelessly download songs directly. It introduced a new version of the best-selling iPod, the Nano, that plays video.
And it announced a partnership with Starbucks: Starting in October, the coffee chain's icon will light up on the Touch whenever a user nears a shop that has Wi-Fi access. Users can then download the song that's playing in that Starbucks shop or get a list of the 10 most recent songs played.
Analysts expect Apple's new iPods will help the company clinch yet another blockbuster holiday selling season. But it will also have to deal with investors who love Apple's meaty profit margins and customers who are suffering from a bit of buyer's remorse.
The eight-gigabyte iPhone will now cost $399 - one-third cheaper than when it went on sale June 29. The four-gigabyte iPhone, which sold for $499, will be phased out. By comparison, the iPod Touch will sell for $299 for the eight-gigabyte model and $399 for the 16-gigabyte one.
Ryan Roth, who bought an iPhone for $599 on Friday after months of research, chalked up his purchase to "the worst timing ever."
Roth, 32, of New York, said he planned to call Apple's customer support hotline to see if he could get a $200 rebate or a smaller store credit at iTunes.
"If they could do that, I'd be very happy," said Roth, who has been thinking about getting a cell phone for four years but held out until the last week.
"Otherwise, I realize this is not their problem: I agreed to the original price - it's my fault. It just kinda sucks."
Apple spokeswoman Natalie Kerris noted that anyone who purchased an iPhone within the past 14 days can get a refund under Apple's return policy - if the item is unopened. The policy also allows for a refund of the price difference if a product was purchased within 14 days of a price cut and the owner has the original receipt.
Apple stock dropped more than five per cent after the price cut was announced, closing at $136.76, down $7.40 cents. In extended trading, it lost another $1.01.
The steep price cut less than three months after the iPhone's launch is a surprise from Apple, which usually keeps prices steady while adding new features and offers discounts only when a product begins to get old.
Yet analysts say quick discounts are typical for the cell phone industry. The world's best-selling cell phone, Motorola Razr, for instance, debuted at $499 but can now be bought for less than $100.
"This is about Apple learning how to become a cell phone retailer," said Jeff Kagan, an independent telecommunications industry analyst based in Atlanta.
"All of a sudden it's in the cell phone business, and everyone is trying to figure out how to measure it, and we don't know yet."
Apple CEO Steve Jobs said the company is on its way to selling one million iPhones in the United States by the end of September.
Apple executives characterized the revamped and expanded iPod line - in which the iPhone is cast as its top model - as its most robust lineup ever for the holiday season. In 2006, Apple sold a record 21 million iPod players during the holiday quarter, about 50 per cent more than in the same period the year before.
In all, Apple has now sold more than 110 million iPods since they debuted in 2001.
The new iPod Touch Jobs unveiled at a special media event Wednesday will - like the iPhone - have a 3.5-inch touch-screen and wireless Internet access, allowing users to download songs directly to the gadget. The Touch also similarly can be used for storing photos, music, videos and other digital data.
And users will be able to scroll through menus with a light touch of a finger and use two fingers to resize photos, as they can with an iPhone. But it won't operate as a cell phone.
The new iTunes Wi-Fi store will become available after the iPod Touch starts shipping worldwide later this month, and stores around the country will come online in stages in coming months.
People using the iTunes Wi-Fi store will be able to download songs for the same price as they would pay at the regular iTunes store, which charges 99 cents per song.
The iPod Touch is less than a third of an inch thick, thinner than the iPhone, and with the Safari Web browser will offer quick access to Google, Yahoo and YouTube.
The Starbucks partnership begins at 600 stores in New York and Seattle on Oct. 2.
In November, it will be available at 350 stores in the San Francisco Bay Area, and by the end of next year it will be in all Starbucks with Wi-Fi across the U.S.
Financial terms of the deal weren't disclosed.
The new Nano, which will be in stores starting this weekend, will come in a four-gigabyte version for $149, and an eight-gigabyte version for $199.
"It's incredibly tiny. It's incredibly thin," Jobs said of the new Nano, which features a 320-by-240-pixel screen and can play back 24 hours of audio. "We think it's really, really beautiful."
Apple also announced it will be selling ring tones for the iPhone for 99 cents, plus the 99-cent cost of the song. Ring tones from more than 500,000 songs available on iTunes will go on sale next week.
*************************************
Apple slashes 8GB iPhone price by $200
By Philip Michaels
Those 4GB iPhones just became collector’s items. Apple dropped the 4GB version of its mobile phone and slashed the price on the 8GB model to $399—$200 less than its introductory price.
Apple hopes that the price cut will spur sales of the mobile device it introduced in June. “We want to put iPhones in a lot of stockings this holiday season,” Apple CEO Steve Jobs said at a press event in San Francisco Wednesday.
iPhone sales have been closely watched since Apple released its mobile phone to much fanfare on June 29. Back in July, Apple’s stocked slumped badly after AT&T announced iPhone activation figures that failed to meet analyst expectations.
Apple reported that it sold 270,000 iPhones during its fiscal third quarter and told analysts in July that it expected to sell 1 million phones by the end of September. Jobs said Wednesday that the company is on track to meet that goal.
“We want to make iPhone even more affordable for even more people this holiday season,” he said.
The 4GB iPhone may be leaving Apple’s product line, but the remaining stock has undergone a price cut of its own. At press time, the Apple Store was selling 4GB models for $299—a $200 drop from their introductory price.
*************************************
news analysis Apple's decision to slash the price of the iPhone was heartening, confusing and troubling to the company's many followers Wednesday.
Apple CEO Steve Jobs announced Wednesday at San Francisco's Moscone Center that the 8GB iPhone now costs $399, a $200 discount off the initial launch price for Apple's first mobile phone, released just 10 weeks ago. The news of a 33 percent drop in the iPhone's price was sandwiched between the unveiling of the new iPod Touch and a performance by British singer KT Tunstall, almost a throwaway piece of the keynote speech on a day that saw Apple unveil new iPods in every category it occupies.
"We want to get even more aggressive than this," Jobs said, as he displayed the wide range of iPods that will be available this holiday season. The iPhone price cut certainly was aggressive, and could perhaps convince some who were sitting on the sidelines to jump on board with Apple. However, it does raise the question of whether Apple needed to stimulate demand for perhaps the most hyped gadget in history by reducing the price so drastically so soon after its release.
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 best-selling handset among smart phones and feature phones sold to U.S. consumers in July, the first full month it was on sale, according to iSuppli.
But iSuppli estimated that only 220,000 iPhones were sold during the entire month of July. Apple reported selling 270,000 iPhones in just the first 30 hours the device was on sale in June.
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 far fewer iPhones than were sold by Apple, and one of the reasons given for that gap was that a large number of iPhones may have been in transit as the quarter closed on the night of June 30.
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 fell precipitously after news of the iPhone price cut surfaced, to close down 5 percent. Still, the stock was worth more at the end of Wednesday than it was last Wednesday.
It could also come at a cost to Apple's reputation among its most dedicated fans, who were dismayed to learn they paid $200 more for their iPhones not too long ago than someone who entered an Apple store today.
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
*************************************
Would you pay $499 for Apple's new iPhone? Apple is betting you will, but if not the computer maker has plenty of room to make you a deal. In fact, iSuppli, a market research firm, predicts Apple will quickly cut iPhone's price.
The reason is simple. According to iSuppli, Apple will take advantage of the "must-have" buzz surrounding its new gadget to try and get at least $499 for it, but would have a 50 percent gross profit margin at that price. Price cuts, they say, are inevitable.
"iSuppli estimates the 4Gbyte version of the Apple iPhone will carry a $229.85 hardware and manufacturing cost and a $245.83 total expense, yielding a 50.7 percent margin on each unit sold at the $499 retail price," said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli.
"Meanwhile, the 8GByte Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 53.1 percent margin at the $599 retail price."
For Apple, such a strong hardware profit is par for the course, with the company having achieved margins of 45 percent and more in products including the iMac and iPod nano, according to iSuppli. However, because Apple is facing extensive competition in the music-phone market, the company may need to cut into its margins to reduce pricing in the future.
"With a 50 percent gross margin, Apple is setting itself up for aggressive price declines going forward," said Jagdish Rebello, PhD, director and principal analyst with iSuppli.
Apple faces a bevy of competitors in music phones, with 835 models expected to be introduced by various competitors in 2007. iSuppli estimates that 14 music-enabled mobile phones with features that compete closely with the Apple iPhone already are shipping from manufacturers including Nokia, Motorola Inc., Samsung Electronics Co. Ltd. and LG.
Shipments of music-enabled mobile phones will rise to 618.1 million units in 2007, up 39.9 percent from 441.7 million units in 2006, iSuppli predicts. By 2010, the company estimates that shipments of such phones will increase to 1 billion units.
Top 10 Funnest Jokes
