Friday, September 07, 2007

...and one more thing

About that iPhone price cut.

The iPhone is a huge success in terms of a good base product. I have seen everyone from casual friends to Andy Bechtolsheim toting the handsets and praising them for being the Web done right on a cellphone. No more seven clicks to get to a strange carrier network with useless test blurbs on tiny displays. This is a couple quick hand motions to the real Web. Brilliant.

The device has also become a cultural icon. It represents the shift of the geeky computer and the Web into fashionable, useful consumer communications devices. Everybody gets that.

But Apple realized for all its achievements, the iPhone was not on track to being the kind of financial success it needed to avoid becoming a drop in the billion-unit cellphone ocean. There was no big missing feature. In a world where consumers have a choice of several really great free phones, the iPhone just cost too damned much.

Apple was on track to sell maybe two million iPhones in its first year, according to published reports. Not bad for a computer company starting from zero in the phone business, but not enough to establish Apple as the next Nokia, which is Steve Jobs' goal.

The $399 price—and the $100 rebates—are steps in the right direction. But my belief is the iPhone is not 400 times better than the great Samsung, Motorola and Nokia phones offered for free. The pressure is on to see if Apple can innovate, get volume and make money in this mature and competitive market. Expect more price cuts.

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