Apple doesn't do loss leaders

A couple of articles I’ve read today suggest that Apple is getting ready to slash the price of the iPhone and that it’s now subsidizing every Apple TV device sold. My take – this is total nonsense.

A couple of articles I’ve read today suggest that Apple is getting ready to slash the price of the iPhone and that it’s now subsidizing every Apple TV device sold.  I agree with Carl Howe – this is total nonsense.

The first article I came across was on TheStreet.com, and this piece seems to have come to the conclusion that the only way Apple will sell 10 million iPhones by the end of the year is by slashing prices.  The other article, which appeared on Silicon Valley Insider, takes the highly suspect teardown analysis carried out iSuppli on the Apple TV without question to come to the conclusion that Apple is going nuts of cutting prices.

Neither article makes sense to me.  The problem with aggressive price cutting is that it sets the tone for what customers expect in the future, and rather than looking for new features, customers get hooked into looking at little more than the bottom line.  The tactic didn’t work for Dell (in fact, all Dell’s aggressive price cutting achieved was to devalue PCs) and it would be a chancy move for Apple.

Also, both articles miss a glaring point – Apple doesn’t need to cut prices.  Things are going very well for Apple and products are selling at a record pace.  Sure, Apple TV has been sluggish but price isn't the reason for this.  Also, given how jittery investors are, being seen to subsidize products might be seen to be a desperate move on Apple’s part.

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