A previous comment about Apple’s iPhone being selling slowly brought out the expected iCabal attack hounds, but the truth is, the iPhone is too much of a luxury item, even after last summer’s surprising price cut, to be a success on the order of the Mac or iPod. The Wall Street Journal has a short note about this topic today, actually:
For Apple so far, the iPhone has generated more investor and consumer buzz than it has a financial bonanza for the company. The device and related products in its most recent quarter only accounted for about 5% of Apple's revenue, partly because of the way Apple accounts for sales from the product. The iPod, in contrast, generated nearly a quarter of Apple's $7.51 billion in revenue in its most recent quarter.
Naturally, Apple has launched various initiatives in order to meet its publicly-stated goal of selling 10 million iPhone units in 2008. There will be a second-gen hardware device with 3G capabilities. They are aping Microsoft’s PC strategy by hitting the corporate market with Exchange support and other enterprise functionality. They’ve expanded, or will soon expand, the iPhone’s reach into every major cell phone market on earth. None of this, however, will do the job. As I’ve noted previously, the iPhone simply costs too much. They have to drop prices, and dramatically.
It looks like that’s exactly what’s happening. I read about this today in “The Irish Times,” but since that paper doesn’t allow non-subscribers to read their stories online (shame!) I had to look around elsewhere to find it. And here we go, a Financial Times story that explains that Apple, finally, is reversing course on their pricing strategy and doing the right thing:
The new version of the Apple iPhone is set to be sold at significantly lower prices than the existing one, in a tacit acknowledgement by the US technology company that its previous sales strategy was not sustainable.
Apple has bowed to pressure from mobile phone operators and agreed they can subsidize the latest iPhone, expected to be unveiled by Steve Jobs, Apple’s chief executive, on Monday.
The subsidy arrangements should increase Apple’s chances of hitting its target of selling 10m iPhones during 2008.
The target has been made challenging by the global downturn. Apple has reported selling 1.7m iPhones so far this year.
Analysts said AT&T, the US mobile operator selling the iPhone, could provide a $200 subsidy on the handset, enabling it to go on sale to consumers for $200 or less. The first version costs US consumers $399 because there is no subsidy.
It’s amazing what a little challenge can do to spur new ways of thinking. This is long overdue.