Friday, September 07, 2007

Paul Kedrosky: Apple: More Troubles Today

Paul Kedrosky: Apple: More Troubles Today:
As I said yesterday, 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.
I've been fascinated by the whole iPhone pricing phenomenon. Not just the recent price cut "fiasco", but the fact that Apple released it, and pumped it, at the initial price of $599. That's totally crazy. In fact, $399 is really too high for a phone, even a really cool one, to be mass market, which is what Apple wants.

Which leads us to the real reason for this "fiasco", and why I think my favorite financial geek, Paul K, is partly off. This price cut may have been ill conceived, but it wasn't rash. The only way Apple could pass off $399 to mass market consumers as an attractive price was to intro at $599, a totally outrageous price, then cut it by what appears to be a significant amount. "Hey, a phone for $200 off? That must be cheap!"

But I agree that this move was definitely ill conceived, Apple truly botched this one. Not only is $399 for a phone still way out of reach of mass market consumers, this self-inflicted PR shot to the foot will take a lot of work to undo. Jobs will always find a way to make his cult happy about getting screwed and ask for more, but he's got no such sway over the masses he hasn't won over yet -- and he just pushed them a bit farther out of reach.

Ironically, I finally see an Apple product I might buy! I think the new Nano might finally fit my late adopter tastes :-).

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