iPad Pricing: How Low Can You Go, Apple?
The iPad’s lower-than-expected price may go lower still if the device doesn’t perform as well at market as Apple hopes. Recounting his recent meeting with some executives from the company in a research note issued last night, Credit Suisse analyst Bill Shope said Apple is evidently quite willing to get even more aggressive with the iPad’s $499 to $829 pricing.
“While it remains to be seen how much traction the iPad gets initially, management noted that it will remain nimble (pricing could change if the company is not attracting as many customers as anticipated),” Shope wrote.
Now, it’s a truism that most companies are open to price cuts on any product if they need to increase sales. That said, this is an interesting disclosure coming from Apple (AAPL) execs, particularly so far in advance of the iPad’s actual debut. Certainly, it calls to mind the company’s decision to slash the price of the iPhone by $200 two months after it went on sale and the early-adopter rebate it was forced to issue afterward. It seems odd, then, that Apple execs would even hint at the possibility of an early price cut lest they give folks already on the fence about buying the first iteration of the device more reason to stay there.
Unless they’re planning a prerelease price cut to really juice sales. Remember, Apple reportedly stands to make about a 42.9 percent margin on the iPad, so there’s presumably plenty of room for the company to hit an even more aggressive price point that would really put the device in the netbook range.
Comments
Nice job, Apple. Now all the people who were going to buy an iPad on day one just to look cool will hold off until the first price cut happens, since owning one before that will be like having “SUCKER” tattooed on your forehead.
Posted by Matt Dana at February 8th, 2010 at 7:28 pmI think you're right about the pre-shipping price cut. Otherwise, talking about a price cut now is just plain crazy.
Might be based on Apple betting on significant profits in accessories, apps, ebooks, movie, et al.
I also think they want to own the market before Android has a chance to commoditize it.
Posted by pk_de_cville at February 8th, 2010 at 7:33 pmAt this point the comment is still hearsay evidence. Maybe this Credit Suisse guy wasn't supposed to talk. In any case, now the price cut has to come before the release, or else Apple has some 'splaining to do.
Posted by neal157 at February 8th, 2010 at 8:35 pmI think the price of the data plan was pretty fair compared to what everyone is paying on there phone and with no contract.
Posted by iPadTablet at February 8th, 2010 at 9:24 pm> Apple reportedly stands to make about a 42.9 percent
> margin on the iPad,
That figure is only the hardware. It doesn't take the software into account. It doesn't take the service into account. It's meaningless.
It used to be ridiculous to cite these figures when devices came with very little software, but the Apple gear since 2007 has been 80% software, 10% service, and only 10% hardware. The hardware is so minimalist it's like a picture frame. David Carr just said “One thing you have to understand about [the iPad] is that the gadget disappears pretty quickly. You’re looking into pure software.”
When you buy an iPad you're paying for the software (iPhone OS, iPhone SDK, 3rd party apps, iTunes, iTunes Store, App Store, iBookstore, OS X, Core Text for the world class typography, CoreAudio, CoreVideo, QuickTime, the heuristics that make the Apple touchscreens the most responsive and easiest to use, Quartz for the 3D, CoreAnimation for the animations you see throughout) and service (Apple Store, AppleCare) so you can stop into an Apple Store and get help with anything.
A Monet painting may be only $40 in hardware (frame, canvas, paints) but that is not the actual value. A much greater original software value was added by Monet to that $40 in parts. Same with Apple's stuff, most of the value is the software.
The way you know this is true is Steve Ballmer showed off the HP Slate running Windows 7 and the world yawned. Like showing off a digital photo frame that can only show a photo of Steve Ballmer. The hardware is not the point at all.
Another thing that shows this is if your iPhone stops functioning, you take it into the Apple Store and they swap you a new one, then you take the new one home and sync it once with iTunes and you're back to where you were before. In no time you will forget that is not the same phone as before. The action is all in the software.
Posted by JohnDoey at February 9th, 2010 at 12:14 amThis is story is making the run because journalists are making something bigger than it is. There is no news in this statement, this is the way it is with every product ever made by anyone. It's been picked up because of the Apple multiplier effect during this post iPad announcement period (“What the hell will we write today?”). How come last week we were all shocked by the low price, and no we hear this we won't buy until it's lower? It's nuts. Personally, there is nothing wrong with the iPad price, I just wish the memory was doubled and that 3G was standard. It's not lower prices, it's more value at the same price that's needed.
Posted by tedcranmore at February 9th, 2010 at 3:31 amApple may have heard me (just kidding). Netbooks are selling for $299 with a keyboard and 250 GB of storage. If this thing (iPad) is a media device with video playing capability as one of its attractions, how come it starts at only 16GB of storage? I understand that an SSD drive is the way to go, but Corsair just released a 128GB SSD drive that retails for $206; and Apple’s wholesale cost should be considerably lower. They own the processor and operating system. I would be surprised if the least expensive iPad cost more than $150. Whatever the cost, it still is not desirable. I would not advice anyone to buy an iPad with less than 64GB of memory; and at $700, it is too expensive for a non-essential computing gadget. But if Apple can get AT&T to push these things, they and the press would celebrate how popular they are.
Posted by Andrew Augustine at February 9th, 2010 at 4:48 am