From AppleInsider:

Wu: Apple’s “fatboy” nano could be this holiday’s dark horse

By Katie Marsal
Published: 11:00 AM EST

In a research report released Thursday morning, American Technology Research analyst Shaw Wu said Apple’s new iPods are worthy successors to the models they replace, especially the iPod nano “fatboy,” which he believes will emerge as this year’s most popular stocking-stuffer.

“We find the new ‘fatboy’ nano most intriguing with its powerful feature set, 2-inch widescreen, unique form factor, and aggressive price points,” the analyst told clients.“We strongly believe this product is the dark horse to watch this holiday season and that it is positioned to have a similar impact as last year’s redesigned iPod shuffle, which was a run-away seller.”

Wu explained that the “fatboy’s” aggressive entry level price point of $149 for the 4GB model (and $199 for the 8GB model) is likely to steer consumers away from the bare-bomnes iPod shuffle at $79 and towards the nano’s video and gaming capabilities.

More generally, the analyst was impressed with all of Apple’s iPod refreshes, noting that they’ll combine for a “very strong” line-up for the upcoming holiday season. “From our assessment, we find the feature sets and price points well differentiated and believe this will help minimize cannibalization among product lines and versus iPhone,” he wrote.

Similarly, and contrary to popular opinion, Wu found the price cut on 8GB iPhones to $399 from $599 to be both positive and necessary.

“We have had reservations with its high price point and are glad to see Apple address this problem,” he explained. “In addition, we believe this lower price is necessary to reduce cannibalization with the new iPod touch, which is essentially a thinner iPhone without the cell phone, e-mail, and Bluetooth.”

The one concern he does have with the cut, however, is the reaction from many of Apple’s most loyal customers who are now feeling ripped off after having paid $599 for the handset over the course of the past nine weeks.

“The one concern he does have with the cut, however, is the reaction from many of Apple’s most loyal customers who are now feeling ripped off after having paid $599 for the handset over the course of the past nine weeks.”

OK, I’m sick of this parroted nonsense. There’s no need for analysts to pander to whingers in this way. Every digital device anyone’s ever bought was a “rip-off” that was much cheaper a few months later. And it’s $200 off a $2000 2-year cost; that’s 10%, not 33%.

I totally disagree. As a long time shareholder and someone who stood in line for 22 hours I at first blew off the price drop for the same reason you just expressed. The cost of many, many iPhones has been paid for by the profits I’ve made with AAPL. It’s not the $200 that bothers me as much as the bad public relations and insensitivity it shows to “early adopters.” For the first time I’m starting to wonder about the customer service skills of management. A huge percentage of loyal customers are going to feel like this was a big F**K You.  It was a mistake to risk the alienation of what was once such a loyal group.

[quote author=“sleepygeek”]“The one concern he does have with the cut, however, is the reaction from many of Apple’s most loyal customers who are now feeling ripped off after having paid $599 for the handset over the course of the past nine weeks.”

OK, I’m sick of this parroted nonsense. There’s no need for analysts to pander to whingers in this way. Every digital device anyone’s ever bought was a “rip-off” that was much cheaper a few months later. And it’s $200 off a $2000 2-year cost; that’s 10%, not 33%.

I agree. Can’t remember how much the Motorola Razor was when it first came out - but it wasn’t cheap! Then they cut the prize and now you can get it for FREE if you sign up a contract.

[quote author=“sleepygeek”]OK, I’m sick of this parroted nonsense. There’s no need for analysts to pander to whingers in this way.

Exactly. You don’t hear about the 5M folk who just said: Cool! I can afford an iPhone now.

Oh Christ give it a rest moaning about “the poor early adopters.” Tech gets heavily discounted after launch quite a lot. This might be a new tactic by Apple, to discount so deep so quick, but its nothing new and extremely common in the handset business, and nothing to get your knickers wet over.

You got an iPhone. Its fantastic isn’t it? So enjoy it.

“Moaning” is not the issue. Perhaps you should step out of your ivory tower and listen to how pissed off MANY people are. This move will make people much more reluctant to buy new AAPL products. I’ve been listening to that anecdotal evidence all evening.

[quote author=“joel90069”]“Moaning” is not the issue. Perhaps you should step out of your ivory tower and listen to how pissed off MANY people are. This move will make people much more reluctant to buy new AAPL products. I’ve been listening to that anecdotal evidence all evening.

No it won’t. They will still buy the latest and greatest Apple products as they are launched, because the early adopters buy the product and not the price.
The guys who wait, would have waited anyway. That’s because they’re not early adopters.
This will have zero impact on future sales of new products.

Its ok to have a little moan about this, but you have to recognise it for what it is: a little moan. Nobody who wants what’s new right now is going to wait for a price cut, unless they weren’t really going to buy right now in the first place.

Tommo bought an iPhone for $599, just like many others on AFB, including myself.  I think that, while the price drop may have come sooner than most anticipated, it would have really been naive to assume there would NOT be a price drop.  This is TECHNOLOGY!  It’s the KING of price drops.  There are those “early adopters” who *should* be accustomed to paying more to have something “now” and the “wait and see” group who don’t buy right away.  I belong to the former…gladly.  I’ve enjoyed my iPhone for several weeks.  It has added quality to my daily life and ease of getting done the things I need to do.  I think that most rational “early adopters” realize this was going to happen and should hold no animosity toward Apple.  EVERY new product or price drop affects *someone*...what about people who just bought a Nano a couple of months ago?  (I am one of them…bought a hot pink Nano for my 7 year old daughter…now she wants the iPod Touch)  They paid $199 for something with WAY less functionality than what’s available now.  Such is life in the age of technology.  So, I agree with Tommo…early adopters shouldn’t whine about their lost $$.  It’s the price we paid to be the first to enjoy the new toy on the block.

We need to move this topic to the appropriate thread.

Thanx

We need to move this topic to the appropriate thread.

Thanx

The price of being the “first on the block” was apparently $200 in this case.  That’s it .... if you felt like it was worth standing in line and paying $599 you did ... and by all accounts you were more that satisfied with your purchase. 

I do agree that everyone was shocked at how quickly the price changed ... but I don’t think most early adopters will be that upset ... after all most people who can dish out $600 for a phone are probably not sweating the $200.

[quote author=“joel90069”]A huge percentage of loyal customers are going to feel like this was a big F**K You.  It was a mistake to risk the alienation of what was once such a loyal group.

The mistake may have been not to lower the launch price; that is clearly when the real decision (not to lower the price yet) was made. But Apple may now be trying to avoid alienating September/October buyers when a new iPhone model ships sooner than planned. This may have been forced on Apple by the European launch negotiations and slipping date. No longer enough time available to launch in Europe with the current iPhone.

Carl Howe nails it as usual, and “gets” that this was a strategic decision by Apple set way long ago and added significantly to the company’s launch profits.
——————————————————————————————
Carle Howe
Blackfriar’s Marketing
Thursday, September 06, 2007

The iPhone price cut: just smart marketingBased upon the press today about yesterday’s Apple special event, you’d think that Steve Jobs was selling Zunes instead of cutting prices on Apple’s highly popular iPhone.

Despite completely revamping Apple’s iPod line for the holidays, the number one story today is about the $200 price cut on the Apple 8 GByte iPhone. There were more than 11,000 stories on Google News about the iphone over the past 24 hours, Apple stock dropped 5% yesterday, and pundits are claiming people who bought iPhones over the past few months are anywhere from “irked” (USA Today) to “angered” (The Boston Globe) to “screwed” (The Unofficial Apple Weblog, and it’s their word not mine).

Get a grip, folks. This wasn’t personal; Apple simply made a shrewd marketing move. It paid off too—to the tune of about $150 million which will fall to the profit line over the next couple years.

Let’s rewind a few months and review what actually happened. Apple went into its June 29 iPhone launch with a stock of about 300,000 iPhones and a manufacturing capacity of roughly 150,000 a month, give or take. It knew it wanted to price the phone at $399 for the holidays, because it expected to ramp up its production lines significantly by then. But until about September or so, Apple was looking at constrained production. Demand was going to exceed supply—big time.

Now, if Apple had launched the iPhone at $399, what would have happened? The lines at the Apple stores would have been twice as long, but there would have been no more iPhones. That means twice as many prospective customers would have been disappointed and turned away as the product sold out. Everyone and their brother would have written articles about how Apple has misjudged the market and its production. It would have been a PR disaster.

Instead, Apple used the Force—the force of marketing, that is. It signaled its constrained production by introducing the product at a relatively high price (although as we’ve noted previously, $499 was a price that was entirely within normal ranges for other cell phones such as the original Motorola RAZR and is still less than today’s Nokia N95). In essence, it said with its price that this phone was for the cool, well-heeled person who had to have the best. And so Apple had the largest consumer product launch in history by dollar value and even so, it was often out of stock for a month.

Now Apple could have continued this approach going into the holiday season, but by this time, its manufacturing partners have figured out how to make the phones and boosted production. This was a requirement for Apple to meet its goal of selling 10 million iPhones by the end of 2008—it had to have two to three times the production capacity by then. So with greater supply (and lower manufacturing costs to boot), Apple cut prices for the holidays.

There’s one other important point: Apple needed to rationalize its pricing of the iPhone against the iPod touch launch price. The iPhone couldn’t carry a $200 premium over an iPod touch; too many people would have just said, “I already have a phone” and bought those products. But by bringing the iPhone price into line with the iPod touch, Apple ensured that consumers could choose whichever device met their needs best without pricing playing a major factor.

We can calculate what this little twist was worth to Apple. We know based upon Jobs’ statements yesterday that Apple is on track to sell its millionth phone this month. So for safety’s sake, let’s say that 900,000 are already sold at the higher price. Of those, maybe 150,000 will get some sort of rebate or refund through their credit cards or price protection (I don’t think it will be nearly that high, but let’s just accept it for argument). That leaves 750,000 phones that earned an extra $200 premium over the targeted $399 selling price. Do the math, and you discover that Apple pulled in an extra $150 million for its trouble. Not a bad business decision at all, given that that $150 million is largely profit. And that’s a nice profit cushion for the iPhone business unit to have while Apple ramps up its carrier subscription revenue numbers.

People in the technology and investing press need to realize that Apple is in the high-touch consumer products business. Even at its high price, an 8 GByte iPhone was still less than your average Fendi or Louis Vuitton handbag, and no one writes outraged articles when those go on sale every year. With a clever pricing strategy, Apple both garnered a $150 million premium to its normal sales, generated significant PR buzz with almost no advertising or other marketing, and now is getting even more attention from its new lower price. As Steve Jobs said today about falling iPhone prices in USA Today, “That’s technology.” But it’s darn good marketing as well.

Once again I beg to differ. The “early adaptors” were the people who bought the first weekend (like me). I was well aware of all the above, believe $200 was worth having the iPhone for a couple of months and the money is irrelevant. We are now coming up on one million customers. We’ve gone beyond “early adaptors.” This sends an awful message by management on several levels and I think it will come back to bite us in the form of a mistrusting public.

[quote author=“joel90069”]Once again I beg to differ. The “early adaptors” were the people who bought the first weekend (like me). I was well aware of all the above, believe $200 was worth having the iPhone for a couple of months and the money is irrelevant. We are now coming up on one million customers. We’ve gone beyond “early adaptors.” This sends an awful message by management on several levels and I think it will come back to bite us in the form of a mistrusting public.

You’d better not tell all the people ordering the iPod touch that after Christmas they’ll be able to get one with 32GB for the same money or the same model for $100-150 cheaper then

Could it be possible that in a week or two Apple would offer a $100 or so in-store credit to these early adopters. I’m sure they would not want to set a precedent but it would generate tremendous goodwill. Any views on this?