iPhone Price Cut Surprises Media

By Reynolds Center Staff
September 6, 2007 08:28 PM

Apple Inc.’s decision to slash the price of the iPhone, followed by the offer of a credit to previous buyers, immediately had reporters searching for motives behind the move.

 “Apple is well known for cutting prices on its products,” said Troy Wolverton, who covers Apple for the San Jose Mercury News. “But for them to do this drastic price cut so soon after a major release is very unusual for the company. It’s very unusual for a tech company.”

Speculation ranged from pushing product sales heading into the holiday season to the  iPhone needing a sales boost.

 “The lesson to be learned for business journalists covering Apple is to be careful around Steve (Jobs),” said John Markoff, a senior technology writer who covers Silicon Valley for The New York Times.  “He is a great salesman.”

Markoff expressed surprise at the price cut but found no evidence of slumping iPhone sales.

“In terms of performance, contrary to current perceptions, the iPhone has done remarkably well,” he said. “It has definitely been the most hyped product in the history of phones.”

Still, some suspicion remains among journalists who regularly cover Apple.

“I think the prices were cut so that the level of iPhones can be reduced during the holiday season for when a newer version of the iPhone is launched in January or spring 2008,” said Sonya Smith, who covers Apple for The Orange County Register.

Wolverton said the price cuts, announced Wednesday, have some wondering if iPhone sales were below expectations, despite the company’s assertions that sales are on track.

“There is some speculation he saw an opportunity to juice sales for the holiday season,” Wolverton said.

During a press conference in San Francisco, Apple CEO Steve Jobs announced the price of an 8-gigabyte iPhone would drop to $400, from $600 when the product was launched in late June. Apple also announced it was cancelling the 4-gigabyte model, which had been selling for $500.

After receiving “hundreds” of angry messages from buyers who paid the higher price, Jobs said Thursday in a message on his Web site that Apple would offer those original buyers a $100 credit.

The news of the price cuts and the reshuffling of Apple’s iPod lineup has led to a decline in the company’s stock. On Thursday, Apple stock closed at $135.01, down 1.3 percent for the day. That came on the heels of a 5 percent stock drop on Wednesday.

“If Apple doesn’t succeed with the iPhone, it will be a real black eye for the company and a bad thing for the company’s stock,” Wolverton said.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism