Apple Says it Will Lower Prices if iPad Doesn't Sell

Remember the kerfuffle over the original iPhone?  Apple charged luxe prices for the first few months, and then after it had wrung every possible dollar out of the early adopters, dropped the cost to capture more price-sensitive users.  Many of those who had bought early reacted with the righteous fury of a wronged spouse.


This time around, they can't say they weren't warned:  Apple has apparently already said that if sales of the iPad aren't brisk enough, it will drop the price.  I expect it will have to, if the company is to have any hope of hitting the 1-5 million sales analysts are projecting in the first year.  $500 is pretty steep for a netbook without a keyboard.

The question, of course, is "how low can Apple go?"  Apple could afford to drop prices significantly on iPhones, because they were driving big volume.  I just can't imagine that they're going to push 30 million iPads out the door in the first 3-4 years of its existence; it's ultimately something of a niche product.

One estimate is that the cheapest iPad costs $270 to manufacture.  Throw in advertising, transportation, distribution, and so forth, and maybe they can cut the price $100 if they're willing to make a slim profit in order to establish a market.  Of course, there's probably more room on the high-end models, and presumably costs will fall as they get more experience, and volume.  But I don't see them getting within striking distance of a Kindle particularly soon.

Still, they can probably cut the cost deep enough to make it worth waiting for.  So why announce it?  It seems to me that this practically guarantees a slow start to sales.

This article available online at:

http://www.theatlantic.com/business/archive/2010/02/apple-says-it-will-lower-prices-if-ipad-doesnt-sell/35576/