This took some guts!

Apple is listening. I wrote here and here the iPhone was overpriced. And today Apple slashed its 8 gb version originally priced at $ 599 to $ 399. And introduced "the iPhone without the phone" - an iPod at $ 299 which does most of what the iPhone does via WI-FI.  It took guts to do it within 2 months of introducing the product.

The refunds and apologies to loyal, early adopter customers who bought in the last few weeks will be an unnecessary distraction - so even more kudos for biting the bullet.

But should AT&T also not follow through as I wrote here?

And why stop at AT&T? As readers of my blog know I harp on this - the industry is full of badly priced products from print cartridges to enterprise software  to international roaming to outsourced storage. Their list prices have no resemblance to what customers end up paying. The industry is more byzantine a maze than the Grand Bazaar in Istanbul. But vendors cling to their dog-eared price sheets. Years after the market tells them they are out of touch.

Another set of kudos, Apple for moving so swiftly.

Comments

[The Geek]

Well I feel like a little kid again. I am so amazed by what happened today. The only thing that could have topped it would have been if Steve would have said "the iPhone is no longer locked down to the mothership, take it to sprint, verizon, tmobile". Great write up by the way. Always great posts, and great sources!

http://www.thegeekery.biz/2007/09/05/steve-jobs-hates-profit/

[Krishna]

As if Steve had a choice...

When George Hotz, a rookie 17 year old picked the AT&T lock and traded it in for a cool NISSAN 350 Z, El Jobso knows only too well that Chinese could soon be close behind with their own versions priced at $100 or less.

Don't hurry to buy it...The Chinese will show the way. The technology is resembling that of a cottage industry. Soon your cornerstore guy would be assembling it. IMO, it's still way too overpriced.

[Sudhir]

Vinnie

WSJ had a different take on Apple reducing prices - that they probably are not meeting their target volumes - this seems more credible to me. Why would any company(or most, especially Apple) reduce prices if they can make more money? I dont see why you see this move from Apple any differently.

[vinnie mirchandani]

Sudhir, Toyota, Southwest...plenty of examples of companies who sit in the middle of the road on pricing and make lots of profit. Too pricey and you stunt your market definition. At $ 399 apple is still making plenty of money, and can now aim for 6-7% market share rather than 1-2%

Krishna, agree as I wrote below...but at $ 299 and wi-fi it is a huge improvemt over $ 599 plus 2 yesr ATT commitment

http://dealarchitect.typepad.com/deal_architect/2007/08/the-150-laptop-.html

[David Scott Lewis (Startech Global Corporation, the Outsourcing Hub for Tsinghua University, China's]

@Sudhir, it's all about consumer reservation prices. And this is why Apple isn't meeting its target volumes (if indeed this is the case, i.e., that they're not meeting their target volumes). We faced this when I was at Microsoft's WebTV business unit, too.

Vinnie's observation of 1-2% versus 6-7% share is probably about right, although some good analysis (requiring a bit of math and lots of time) could nail this number to the true percentages +/- 1%.