John Paczkowski

Recent Posts by John Paczkowski

Apple Could Also “Figuratively” Take Over the Laptop Market if MacBooks Were Free

Let me see if I understand this correctly. Apple, if it so chooses, can halve the subsidized price of the 8GB iPhone 3G, all the while maintaining a tidy 42.3 percent profit margin and extending its dominion over the smartphone market.

And it can do this, because …

… Needham Research analyst Charlie Wolf says it can.

Figuratively speaking, of course.

A $100 price cut could “double or triple” projected sales, Wolf argued in a note to clients Monday. “In short, the iPhone… could figuratively take over the smartphone market leaving only niche players like BlackBerry.”


Now, leaving aside, for a moment, the fact that AT&T’s (T) subsidies of the iPhone 3G’s current upfront purchase cost–which reduced its third-quarter earnings by approximately $900 million, or 10 cents per share–may have left it with little stomach for further subsidies. And leaving aside, as well, the fact that AT&T’s network might not be able to handle a sudden doubling or tripling of demand on its 3G abilities without some difficulty. When has Apple (AAPL) ever drastically lowered prices or compromised the quality of its products simply to boost market share? What was it CEO Steve Jobs said last week in answer to an earnings call question about a cheap Apple netbook?

We don’t know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that. But we can continue to deliver greater and greater value to those customers that we choose to serve, and there’s a lot of them. And we’ve seen great success by focusing on certain segments of the market and not trying to be everything to everybody.”

Wouldn’t the iPhone at $99 be an example of Apple trying to be everything to everybody? I’d argue it would.

Which is not to say that it will never happen. During that same earnings call I referenced above, Jobs also said Apple must be careful not to leave a price umbrella beneath the iPhone from which a rival can underprice it. And a $99 price point would almost certainly close that umbrella, wouldn’t it?