Fire Sale

I suspect the real reason was to get their competitors -- the wireless handset makers -- working on "iPod killer" phones that would be competitive at the $600 price point. Now the rug has been pulled out from under the competitors' feet, because target price point has been slashed by a third, and it will be much harder for a comparable phone to be sold for a competitive price.

Tom, that's probably right. Still, it seems like they could have dropped the price by $100, raked in an extra half-billion dollars over the holiday season, and done another $100 price cut in January. More profits, fewer disgruntled early adopters.

But maybe they've got research showing they'll sell a whole lot more phones at $400 than at $500, and they want to nab those customers before other companies have time to get knock-offs to market.

I think I can see why Apple did this. After the ROKR they must have been wary of getting back into the cellphone market. They priced the iPhone high, counting on at the very least making back part of their investment. And much of the R&D; could doubtless be applied to other products no matter what.

But the iPhone was a hit, and now they see an opportunity to sell a platform rather than just a product. They slashed their prices to near-cost, and are counting on volume and services to pay off in the future. It's no coincidence that the price cut was announced minutes after the integrated iTunes store.

As a habitual early adopter, I'm used to it. I'd be groaning if I had gotten my iPhone a couple weeks ago. Since I got it on the launch day, though, I feel I've gotten something for the extra $200. (Am I rationalizing?)