The Unofficial Apple Weblog (TUAW)

this isnt really about the sales of the iPhones but if you look at the pics of the iPhone the clock, calc, and the weather logos changed (the buttons different on the calc, the time changed on the clock, and the weather buttons displays 23 instead of 73 (well to me it looked like 23, it might still be 73))

just an observation.

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To late, Scott Moritz already tried:

http://www.thestreet.com/_yahoo/newsanalysis/techtelecom/10378004.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

I emailed him:

I think your analysis on Apple is wrong here. Part of the reason they have been able to drop the price has simply a lot to do with economies of scale. It is quite obvious that Apple has been able to take advantage of the fact that they are reusing components for the new iPod Touch and thus able to bring the cost down of what is the most expensive technology on the iPhone, the touch screen. They are also finally sharing their operating system (OSX) between devices being able to further bring down development costs and leverage their existing technology, therefore allowing the the room to bring the cost down even further. If anything the only troubling thing is the deathj of the 4GB iPhone, since its obvious that people were not buying it, but that also might be beneficial in the long term since it will simplify their product line and therefore cuts costs... again.

Lower costs = more profit. Nice try mister Moritz.

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oops im talking about the picture on this page:
http://www.apple.com/iphone/wifistore/

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OK, first of all, I have an iPhone, and I generally love it. I have no doubt that the iPhone is selling nicely.

However, I just have to point out and emphasize that Apple is a for-profit corporation, and no such corporation is going to lower prices on a product that's selling really, really well. I'm guessing that we're seeing one of two situations:

1. Apple anticipated the current sales rate, and had planned on doing this price drop all along, to keep sales going. Keep in mind that this appears to be in keeping with what Apple seems to have done in the past: initially sell to the cash-flush "one-percent-ers", and then successively sell to lower tiers.

2. iPhone sales, while doing well, aren't doing quite as well as Apple would like, and so Apple's lowering the price to meet their sales goals.

Personally, I'm leaning towards #1. However, if Apple significantly misses it's sales goal (even though the PR says otherwise), then it's #2.

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At $399, I'd expect the sales rate to go up substantially. Heck, they'll probably sell a million between *today* and the end of the month.

Meanwhile Apple brand loyalty plummets among those of us dumb enough to buy at launch ($599) two short months ago...

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Yeah, they are selling well - and I'm sure that when taking into account wordwide sales, they will have no problem reaching their 10 million by whenever benchmark, but it doesn't change the fact that tethering the iPhone to one service provider in the US (unlocking is attractive but until it becomes foolproof and futureproof, it will only be done by those who are more technically advanced and that boils down to a very small number of people) puts a ceiling on how many devices they can sell. Lowering the price is the only way to make that ceiling higher, because no matter how cool, the vast majority of AT&T customers are not going to spend $600 (or even $400) on a phone that requires a 2-year contract extension and a $20 addition to their rate plan - it's just not going to happen en masse the way Nokia or Motorola phones are adopted.

There is nothing wrong with that - but widespread penetration of the iPhone in the US is going to be a lot more difficult than much of the buzz surrounding the phone led many consumers to believe.

Even with strong first quarter sales numbers, more than a price drop is going to be necessary for the iPhone to be more than a very niche product.

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I think there is some merit that the sales of the iPhone are not happening as fast as Apple would like. Lets face it if Apple was selling the iPhone at the rate they wanted then why lower the price? Just to sell more at less profit? Well then they would be giving away alot of profit. I think sales slowed down more than they expected and they drop the price to get those numbers going.

I have an iPhone and love it. The problem they are having is not with the iPhone but the carrier restrictions then price. A lot of people are not going to buy an iPhone because its not on the carrier of choice. Apple can't change the carrier problem so Apple needed to lower the price to pick up all of the people who thought the iPhone is great but to expensive for them. This may help keep the sales in the upward swing from the launch.

Another problem is that Apple does not normally drop prices so much this soon after a new product launch. So they will/have made a lot of iPhone customers upset. Not because they dropped the price that was expected. Because they dropped the price too soon and too much to avoid upsetting their current iPhone customers. I think they should have lowered the iPhone by $100 now and maybe another $100 in January. By reducing it increments or at a much later date then the current customers would not feel like they were taken to the cleaners.

I think Apple may need to do a bit of fence mending with current customers. Not because they did any thing legally wrong but you want to keep your core customers happy. And who do we think bought the nearly 1 million iPhones. My guess a lot of core customers.

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"2. iPhone sales, while doing well, aren't doing quite as well as Apple would like, and so Apple's lowering the price to meet their sales goals."

Apple lowered the price because they were not selling as well as planned. Apple never releases a product and drops the price more than 30% just two months later. That ends up just pissing off your customers and if the product is selling up to expectations then lowering the price lowers profits.

Face it they needed to drop the price to get sales numbers up.

Its a good product but the price and the limited carrier choice makes it a much harder sale than an iPod. Plus the competition is much tougher than the iPods competitors.

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The last thing Apple needed was a stock shortage when the iPhone launch came around, given how much hype it had. What's the best way to manage that? Raise the price.

They ended up sailing pretty close to the wind at the start, but the supply chain was working smoothly soon afterwards. Yeah, two months isn't long, but Apple isn't unknown for cutting prices when products get a refresh (in fact, it does that pretty regularly), and they've been working on the iPod Touch for a while now.

Basically, they planned this. They may not have planned the timing, but they certainly planned the strategy. All this “lower than expected iPhone sales” stuff is pretty much plucked out of thin air.

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I'm with Zuriel. Economies of scale. I took Micro-Economics twice (wanted to better my C) and I can tell you this is very apparent if you look at the iPod over the long term. But I know what you're thinking "it's only been 2 weeks". Well, when you're such a profitable company like Apple, you're meeting you goals, the holiday season is around the corner, and you just introduced a fairly competing product in the iPod Touch, you want to give people a reason to keep buying iPhones, and to "beat" estimates (cos we all know that's always good). Then you make a price cut. I bought a 4gb back in mid July and I can tell you I don't regret a day that I spent hacking, browsing the internet and getting un-lost from downtown Phoenix :p... It has been a smooth ride... $3.50/day was worth having an iPhone.

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Between solid sales and economies of scale I'm not surprised that Apple dropped the price. But so soon ?! And by so much ?! I have to say that a $200 price drop makes me more than a tiny bit upset ... even thinking I paid too much.

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I doubt Apple planned a 33% price cut before the lanuch (If they did then they really did screw us. Its been something like 70ish days since the launch. If sales are doing so well and they just wanted market share why not cut the price a more reasonable amount 15% and wait a bit longer or as some have said with a refreshed iPhone product. That way current customers don't get so pissed that they got ripped off so soon and you can still grow market share. I think this miscalculated sales and decide to cut prices.

Plus what iPhone refresh just happened? None. And as a lot of people have noted Apple normally keeps the price the same or near the same and adds features to make it more attractive. I remember that Apple wanted to show the mobile phone market that cells phones are worth something and have value thats why no subsidy. They want their products to have value over the long term. Well how do you do that if you drop your drawers so quickly?

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"Meanwhile, a survey by research firm iSuppli released Tuesday suggested that iPhone sales had slowed markedly after their first days on store shelves and were not on pace to meet Apple's own forecast for current quarter sales."

http://origin.mercurynews.com/ci_6807817

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I think Apple is playing a strategy game with the smartphone/portable media market. I think Apple see that they must succeed with their strategy of getting as many of these out there as possible so they can grow a stick so big they can beat the content companies and phone companies all in one go. Some piece of the puzzle that only Apple knows has fallen into place and SJ feels this is the best time to lower the price to get a ground swell of adopters so he can dictate going forward both mobile content and telephony market. SJ ain't dumb and he's got a strategy all mapped out triggered by specific market events. The huge iPhone price drop means some event has triggered his internal playbook for that market.

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#9...... you are correct. SJ is too savvy not to have planned this from the beginning. It's not like iPhone sales didn't match up to expectations and so they went to plan B with the ipod touch. Give me a break. This stock price decline today is just Institutions taking profits to get in at a lower price.

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Some of you folks have got to be kidding me. You honestly think it was all part of a grand plan for Steve Jobs to discontinue one model of the iPhone and drastically cut prices on the other model by 33% after being on the market for only sixty-nine days? That is sheer fantasy! Steve Jobs even admitted to CNBC ( http://www.cnbc.com/id/20610206 ) that people were hesitating because of price. Let's look at the numbers. Apple sold 270,000 phones over the last days of June (we have that from the previous quarter's statement). To get to one million, they only need to sell 730,000 more. They have not reached that yet. According to iSuppli, even though the iPhone was the fastest selling smartphone in all of July, Apple hasn't even sold as many phones through July as they had that June. Yes, they say they're on track for one million before the end of this month, but could they have said that before the $100 price cut?

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Come on guys. Apple dropped the price of the iPhone $200 in two months. They NEED to make their sales estimate of 1 million iPhones by end of September lest they deal with a fickle market that will decapitalize the company by selling off stock. While the phone is probably selling "well", its likely selling below projections and needs a boost.

Its not the end of the world, its business as usual.

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