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Apple iPhone: 60 days old, 33% off

Price-slash move takes analysts by surprise, angers (some) current owners

September 5, 2007 12:00 PM ET

Computerworld - Analysts disagreed Wednesday on whether the $200 price cut CEO Steve Jobs announced for the two-month-old iPhone meant that Apple Inc. is having trouble selling the device. But most current owners of the smart phone didn't have a problem coming to their conclusions.

In a move that stunned many of the people who waited in long lines to buy the first iPhones, Jobs slashed the price of the 8GB version by 33%. The iPhone now sells for $399.

"They were not having any trouble selling iPhones," said Ezra Gottheil, an analyst at Technology Business Research Inc. "My strongest guess is that all this was, in fact, laid out long ago. I don't see how AT&T would have agreed to that large price differential [between the iPhone and competing handsets] without something like this planned."

Jobs, naturally, took the no-problem-selling-iPhones line during an 85-minute stage show at San Francisco's Moscone Center. "We're on track to sell our millionth iPhone before the end of this month," he said, the target he and other Apple executives had set in late July during the company's third-quarter results conference call. Those same projections pegged 10 million as the mark Apple is hoping to reach by the end of 2008.

Other analysts, however, were skeptical about the drop, particularly its timing. "We certainly expected a price cut -- that's a normal pattern -- but $200...that was quite a surprise," said Charles Smulders of Gartner Inc. from the Moscone Center. "It's very difficult to know why Apple cut the price now. But we can say that Apple is being very aggressive in meeting its [sales] goals. And this makes it a lot easier for them."

Van Baker, another Gartner analyst who attended the event, was more sure of Apple's decision-making process. "My suspicion is that although they thought they were going to hit a million, sales were not as good as they wanted," said Baker. "[The price cut] also allows them to enter Europe at a much more competitive price and makes [rival handsets] like the Nokia N95 look much less competitive."

Apple has said little about its European iPhone strategy other than to slate the rollout for later this year.

Today, Jobs explained the price cut this way: "We want to make the iPhone even more affordable for even more people this holiday season. So we're going to do something about that today. We're not going to sell it for $599 anymore."

And that raised the hackles -- and the ire -- of some of Jobs' biggest fans: the early adopters who had jumped on the bandwagon in late June and early July.

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