The price is not right for Apple iPhone

The news out of San Francisco that Apple and Rogers will release the iPhone 3G in Canada on July 11th will be welcomed by the many Mac faithful who have been waiting for a long time to get their hands on this device.

The other bit of news from Apple is that they are slashing prices on the iPhone. While this is good news for consumers who always want to save a buck, I am puzzled why Apple is doing this. The iPhone was an expensive device, but people were willing to pay for it. Some people lined up for hours to drop hundreds on the product. Others drove for hours to the U.S. to purchase an iPhone and then unlock it.

I was in Taiwan recently and I heard similar stories from many Europeans who traveled to the U.S. and purchased an iPhone no matter what the cost.

A recent Gartner report has the iPhone second to Blackberry in sales in the U.S. Even thoughApple is new to this market. Slashing prices only leads to other vendors slashing prices and therefore margins eroding, which isn’t a good thing for the channel who like to keep average selling prices stable.

Apple also has cut deals with carriers on subsidies that has lead to this price cut.

This price cut could also be a play for Apple to really compete in the enteprise space where the RIM Blackberry rules.

But, again the need for a price chop isn’t necessary because Apple has a lot going for it. For example, companies are allowing its employees to choose their own smart phones. Many will choose the iPhone because pop-culture says its cool. Apple’s 3G iPhone has plenty of features people will want such as GPS. Apple is also building more enterprise functionality such as Exchange e-mail into the new iPhone.

By making the iPhone available in 70 new countries it can be used by the Global 2000 corporations now.

Other Far East competitors such as Gigabyte are increasing their prices, while offering many more features to maintain margins and average selling prices. RIM has also always maintain its average selling prices.

The other question that still needs to by answered is how will Apple cover all of the regions in Canada. The company only has a handful of Apple stores and will more than likely have to rely on its Mac dealers to help out. But, that announcement was not made today during the company’s annual Worldwide Developers Conference in San Francisco.

We shall see if Apple’s price slash tactic works, but even if it does it will pose a challenge to resellers who are building solutions around the iPhone.

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