Only Steve Jobs and the decision makers at Apple (AAPL) know the real reasons behind doing away with the 4 Gb version of the iPhone and slashing the high end version by $200. But to consumers like me and you, this sure is a big letdown, and has double impact on me since I am long AAPL.
Price cuts on consumer gadgets are not unusual. The iPod video, which I bought for $300 in 2005 and which had 30 Gb capacity, now sells for $300 for a 160 Gb hard drive. But its been more than 2 years since the iPod video came out, and the price difference you pay is the premium for being one of the very few who owned the product in the beginning. Infact its the same with any product. Cars, computers, TVs and the like. There's always a premium you have to pay for owning something when its a fashion. And we're willing to pay that.
But if Apple is telling me that I paid $200 extra for trusting them and buying the iPhone 10 days before their shocking price cut, I am not buying their sales pitch. I was a huge fan of Apple produtcs and will continue to admire their innovation, but I think Apple has gotten it woefully wrong here.
I do not expect Steve Jobs to come out with the real reason behind cutting prices, but I have a hunch the phone's not really selling great. I say this because the reason Steve Jobs gave is that he wants the phone to fill more stockings this year. Thats totally unjustified. And he realized this just 2 months after the roduct release? Why didnt he think of it earlier?
Also, when the iPods were first released, they were ridiculously expensive for the masses, yet Jobs and Apple took their own sweet time to cut prices, and did so only reluctantly.
I think this negative publicity for iPhone is definitely a dampener for Apple. I, for sure will be doubly wary of buying an Apple product from now on, because they just do not seem to have any regard for their most fanatic customers, who swear by every product of Apple.
I am also uncertain about the impact this will have on iPhone sales. I doubt that a $100 price cut will really lure anyone on the fence about the iPhone into buying one. I am of the impression that people who really want an iPhone badly do not care for the $100 price difference, and would have bought it anyway, like a million people have already.
By the way you're eligible for a refund of $200 if you bought the iPhone within 14 days. So rush to the Apple Store and get your money back. Again, I am sure this price cut and refunds will only add to Apple's woes and will cut their EPS for next quarter by at least 10 cents, as Goldman Sachs indicated today.
After all the murkiness is cleared, we'll know more about this price cut and the factors that influenced it, but for now, I am off to the Apple store to get my refund.
Disclosure: Author has a long position in AAPL