Okay, this whole Apple (NASDAQ:AAPL) iPhone price-cut issue continues to spiral. The stock continued to fall Friday as analysts incorporated the earnings impact of the $100 in-store credit into their models. It's not often a fast-growing company with a hot product cuts prices by 33% and then takes heat for the decision, so let's talk some more about it.
1. As I said Thursday, in a perhaps perverse way the $100 Apple in-store credit troubles me more than the initial price cut. I could handle the latter -- Steve's playing for keeps, and he wants to make a statement in the cellphone market. He's prepared to compete on both price and features, which makes him a formidable competitor in that cut-throat business. Fair enough. But the credit's belated arrival suggested the iPhone price cut was ill-considered and somewhat rash, not part of the original plan. That could mean any number of things, some operational, some political, and some financial, but none of them are appealing to investors and analysts.
2. Most analysts are coming to the conclusion (as Eric summarizes here) that the earnings impact of the price cut is minimal to non-existent. Not zero, but not a large enough drop to justify the current tumble in AAPL shares.
3. Further, in the longer run, this is not (yet) about a problem with Apple's iPhone business. Instead, it is largely a public relations fiasco, with a tone-deaf Apple cutting prices without adequate consideration of the political impact on its existing iPhone customer base. That is not the same thing, folks, as the loopy implicit suggestion that Apple should have kept prices high (a point that Tyler Cowan nails here).
My guess is you'll see a coterie of analysts come out defending the stock shortly on the current weakness. The stock, while off 9% in the last few days, is still up 11% over the last month, so this is going to look to many like a buying opportunity.
For my part I'm still a little unsettled by the rebate, and while I like Apple at these prices, I sure would like to know more about when Jobs decided to cut iPhone prices. I think Jobs needs to get more out in front of this issue and take questions somewhere, not just issue a press release.