peter02l

iPhone Price Drop Is A Bad Sign

The reasons for dropping prices for the holiday season have been pointed out in other comments above. To rephrase, many people will be buying presents or choose to indulge themselves over the next three months. Some will purchse phones. All sorts of companies have a lineup of new products and/or price drops lined up to entice shoppers to spend their holiday gift budget on their products. A person could consider a phone, an exercise machine, a new guitar, etc. Because this is the biggest shopping season in the year, everyone expects to get a good deal to boot. The iPhone is certainly a coveted gift. The price drop makes it a good deal. So you can see how someone who might have been thinking of getting a new XM radio satellite system or a fancy watch might want to buy an iPhone instead. Now all these new iPhone owners will not be buying a Nokia or Samsung phone in the next couple of years.
As for the stock price, if you were predicting $200 by January, you should stick to it. All these rebates and the price drop will have a relatively small effect in the next four months because iPhone revenue is realized over 24 months. Say Apple will sell 3 million phones by the end of the year (to be overly optimistic) it will miss out on less than $30 million of revenue over two quarters. Believe me it has made much more in extra MacBook sales during the back to school season. The reason Apple is realizing iPhone revenue over 2 years is so that it can better amortize the component costs over the life of the product and alleviate the unpleasant cycle of bust and boom that follows the introduction of a new product.