iPhone Price Cut: Double Edged Effect

Steve Jobs surprised everybody when announcing the aggressive cut in the price of the iPhone: shifting the high-end the 8-gigabyte iPhone model to US$399 from US$599. Of course, iPhone owners might feel upset, considering that their 2 months old mobile phone lost US$200 of its value within couple of minutes; while Apple announced to be on track to ship its millionth iPhone by the end of September, a quite amazing achievement.
Some analysts consider such announcement as expected in order to further increase the number of potential customers, and AT&T id also seeing it as a good move considering that 25% of iPhone owners are new AT&T customers. Of course, Apple shares immediately lost 5%, as some share holders were expecting premium prices to generate record benefits irrespectively of the goal to achieve a long-term success for the iPhone as expected by Steve Jobs and Apple management.
When one want to look behind the scene for identifying the reason of such price cut, we could come up with many hypothesis in addition to those mentioned already yesterday. Hereafter are some thoughts originating from our analysis and from readers comments:
- Even though the company said it is on track to sell 1 million units by the end of the month, iPhones sale are not growing as fast as Steve would like. If this price could then be expected to further increase the potential market, the magnitude of the discount is impressive: more than 30%.
- Apple decided to press further Smartphone competitors
- Apple cut prices to be prepared for the launch of the rumored Google phone which is reported to be as cheap as US$100 due to ads
- Apple wants to quickly become a major player in mobile Smartphone business by offering a feature-rich model, and combine it with the corresponding offers from the iTunes Store.
- Apple cut the price of the 8GB iPhone model, as it will launch a 16GB model which will be available when the iPhone is launched in Europe (US$499). To fit with the European and Asian mobile phone network, Apple will also launch a 3G+ iPhone, becoming the facto, the new high-end model and price US$599.
- Apple decided to align the price of the iPhone in USA with the one which will be applied in Europe and later on in Asia, in order to avoid the grey market to explode, and drive the interest for third-parties SIM unlocking applications.
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