It's been awhile since I've been this outraged about something, but nothing fires me up more than getting ripped off by someone. And yesterday, Steve Jobs did just that.
I was really establishing myself as a loyal Apple (Nasdaq: AAPL ) fan. After all, I did spend nearly 20 hours camping out for the iPhone. But yesterday, Apple announced that it would be slashing the price of its phone by $200. Sure, I had a feeling this would happen, as all technology has its moment of being the "in" device and then fades away as new models replace it, and the price eventually drops. But two months?
I work hard for my money, and shelling out the $600 for the phone wasn't easy. But it felt cool having a phone that everyone wanted but not everyone could have. However, with the phone now retailing for $400, the device will be financially accessible to a wider audience.
Apple has to know this decision would frustrate its customers who paid nearly 33% more for the phone just over two months ago. So why would it do this?
Certainly, one of the most common speculations is that Apple is running short of its goal of selling 1 million phones by the end of September. So lowering the price will help boost sales. But I think the company's behavior is sketchy, at best. Apple figured that it could significantly mark up the price initially, as the phone attracted gadget enthusiasts willing to pay premium prices for the phone. But now it feels that it has maximized profits from that market and is now tapping into the lower market in order to keep expanding sales.
It's not the price reduction that has me fuming. It's the fact that I feel Apple took advantage of its most loyal fans. The company said that it was pocketing 55% gross margins from the product, so I never doubted that the price would be reduced. But to offer such a steep reduction only two months after the initial launch, the company must be desperate to clear the phones off its shelves. It finally shows that Apple is not indestructible after all.
I think investors can look at the issue two ways. Sure, the iPhone will now be in a more competitive market with smart phones from Motorola (NYSE: MOT ) , Palm (Nasdaq: PALM ) , Nokia (NYSE: NOK ) , and Research In Motion (Nasdaq: RIMM ) . And this, of course, should help drive current iPhone sales.
But iPhone owners are not happy. I know that I will never purchase a newly released Apple product again. So I think that there could be less craze over future Apple releases, which could result in fewer initial sales. The early adopters who set the trends will less likely be among the first to try out new products. I absolutely love my iPhone, and I may be a bit overzealous about the price drop since it directly affects me, but I truly think Apple has made a mistake as a company by implementing this decision.
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Foolish financial editor Kristin Graham does not own shares in any of the companies mentioned in this article. At least paying the extra $200 for the phone made her famous for a day while waiting in line. The Fool has a disclosure policy.