Apple Move is Brilliant

So the blogosphere is irrate at Apple for cutting the price of its iPhone by a third. The move is brilliant and the reaction is unwarranted.

Apple is now operating in several different industries, all of which are coming together at warp speed -- computer hardware, software, entertainment and now the cellular phone industry. Each of the industries have their own market dynamics. The PC industry is one in which there are only two real operating system options -- PC or Mac -- and many hardware options (Dell, HP, Lenova, etc. etc.). When you buy a computer, you have to make one main decision ... do I want Windows or Mac. If you want Windows, you can go to any number of hardware makers. If you want Mac, you go to Mac. This has allowed Microsoft to charge dearly for its operating system. And Apple has been able to keep its prices and margins high because there's no where else to go for a Mac.

The same cannot be said of the cell phone market. There are dozens of handset makers. And they all are trying to kill the iPhone with their next gadgets. Just check out the cellphone section of Engadget and there's a new announcement each day. The typical cellphone release goes as follows -- hot product release, early adopters snap it up for a premium, price is cut 3 months later and the masses adopt it.

This is all that is happening with the iPhone. Jobs wants a larger share of the market. He can't do it at $599/phone. So he needed to get into a price point that competes with Nokia, RIMM, Samsung and Motorola's multimedia cellphone devices. If you picked up a phone for $599, congrats! You're an early adopter. If you waited, congrats. Congrats, you can now get one more affordably.

Personally, I don't like the iPhone as a phone. I don't like it as a messaging device. These are the two most important features for me. The BlackBerry Curve is the best phone and messaging device I've ever owned and I plan to stick with it. I may check out the new iPods. I wouldn't mind having a personal media device with me. But given my new computer (MacBook Pro), I have a great entertainment device with me where I go these days.

RIMM and Apple are two of my favorite stocks (thanks EJL for getting me into them early). I love RIMM's products, I own RIMM and love the stock and the company. I also Apple. I don't love the iPhone as it's just not for me, as I stockholder I love the move to lower the price and the announcement of the new products.

Everyone complaining should just shut up. The market is the market. People wanted an iPhone early, Jobs new it and was willing to sell it at a higher price. No one forced you to buy that phone. Now that the newness factor is gone, it's time for Apple to compete in the trenches. And that's what Apple is doing.