Why this article? *Everyone* knew Apple's margins on the iPhone were to die for. Didn't the author read anything at all about the iPhone before purchase, other than the hype? Apparently not.

Oh dear Oh dear - All this talk about apples price as though the Iphone is not a Joint venture with someone else. ATT had nothing to do with it i guess.

That darn stupid Jobs GUY makes so many bad business decisions.

Well, you've a pretty decent middle ground, but the backbone of your argument on the price drop is potentially and reasonably flawed. It is correct the factories cannot retool with new components overnight, but there is another factor you may not have considered. The same components purchased at a lower price by Apple. Yep, same guts, but lower price on those guts. Most likely components in question are the memory chips and the LCD panel.

How can this happen? 1. Price drops in raw materials or efficiencies gained in raw material factories. 2. Apple negotiated a better price. One of two things happened here. A. Apple met a contractual obligation to purchase X units of X part of iPhone effectively dropping their cost. Or B. Apple was not able to negotiate with an open book due to the secrecy behind this product. iPhone is announced and they can hit the negotiation tables hard. Without a doubt negotiations set in place for the iPod touch memory affected overall pricing across the board. It's like buying the ten gallon container of Arkansas lard at Costco, cheaper.

Either way, the fruit of this price reduction is passed along, and in this case very quickly.

But why so quickly? While investors want to see Apple pack the profit in, they don't want to see Apple reducing potential market share because they've kept a product at a price 33% too high for more than a quarter.

The change makes a lot of sense to me and is not unfounded in the world of Apple. Especially when they are faced with mounting competition from others that are releasing products that very much rival the iPhone at a lower price to the consumer. Pure business. Pure genius.

I understand those who are upset because they just bought a more expensive model. In the technology world though this happens alot in competitive markets. Yes Apple could have kept the price high and continued to take market share away from the other smart phone players. But with the Holiday season looming fast, and a lot more competition from Motorola, Palm, LG, Samsung, and even possible Microsoft, this move is pre-emptive. Many people complained that they wouldn't jump aboard unless the price was closer to the 399 barrier for the 8gig now that it's been dropped, they should be able to double/triple their sales. The company i work for the IT guys have the iPhone, as do many others. I picked up a friend at Philly airport last night and saw 6 iPhones in an hours time, 5 of which looked ceo like.

While this has caused some outrage among early adopters and critics, I think in the end at the end of the quarter the critics will be thrilled, Apple will take market share and a wider base of fans will be on board.

Scales of economies, the more product thats moved the quicker the price can drop. Stop complaining. And buying a 1st gen of a product, you are the beta testers of sorts

I have another thought - I think that iPhones might not have been moving as briskly as they projected, so they needed to goose up the market and try and recapture some of their momentum. They may actually be taking a loss on these, expecting to make their money from some sort of kick-back with ATT on the monthly plan. Scratch deep enought and I'm sure you'll find ATT somehow involved... also, ramping up production on the touch iPod, which no doubt uses many of the same components, may have introduced an economy of scale factor which did indeed lower Apple's cost.

If you really knew anything about Apple's pricing history, you would know they never just drop the price on a specific model. Improvements are made... new features... whatever, but usually a new model is introduced at the same price as the old. Only then does the old model get a price reduction.

I think what's happening here (and is the "aggressive" part of Apple's marketing) is that a 16GB model will be announced (for maybe $499, pricing the phone a reasonable $100 over the 16GB iPod touch) as soon as the 8GB version's supply drops to where they want it. Announcing a 16GB version now would have stalled the remaining 8GB sales before the holidays. Now that would be a marketing blunder. So they take a little hit from all you genius "market analysts" out there, wait to introduce the larger capacity phone in a month or so, and smile all the way through the holiday buying season.

Apple doesn't do anything without a good (and usually profitable) reason.

you sounds very bitter, i don't think that you as someone who just made a 200 dollar blunder can have an objective view.

There are a few problems with your assessment:

1. Everyone knew the iPhone was grossly over-priced long before it was released and that Apple could sell them for half that price. The argument was that it was 'okay' for Apple to charge that much because (a) people would pay it and (b) their products are worth it.

2. We all knew that the hype surrounding the iPod was ridiculous, and that Apple was cashing in on the hype by charging well more than the technology was valued based on the components.

3. Everyone knew item 1 and 2, and there was a large number of folks shouting 'you are getting ripped off!', yet people bought it anyway.

Now it is somehow Apple being bad because they changed the price dramatically?

Sorry. I do not buy it.

So yesterday I was happily catching up on my RSS feeds when I noticed that there was some Apple buzz. I took a look and saw some photos of the new iPod Touch, which is basically an iPhone that can only use WiFi instead of EDGE and obviously has no phone in it. It's quite impressive-looking. Then I noticed that Apple is no longer going to make any more 4GB iPhones, they're selling off their remaining stock at discount. Then I noticed that Apple has dropped the price of the 8GB iPhones by $200.