Quoting Toni Sacconaghi.
Sacconaghi sees a strong parallel in the scorching history of Motorola’s Razr phone. In 2005, Razr’s expensive ultrathin metal-clad design went from being the coveted phone of the moment to a pop culture sensation as the price fell.
Okay... to be a pop culture sensation, prices needs to fall. Race to the bottom.
“The Razr’s unit sales run-rate doubled when its price dropped from an initial $500 to $150, then doubled again when the price fell further to $100,” Sacconaghi wrote in an Apple research note Thursday.
“While offering the subsidy would cost AT&T $200 per iPhone user, we estimate the cost would be more than offset if the subsidy results in an increase in the iPhone subscriber base of around 100% - which appears to be a realistic assumption in light of the Razr’s experience,” he wrote.
Okay... so AT&T cuts prices and makes up for it by doubling the volume. So gazillion additional users x $0.00 in profit = ?
What's in it for Apple?
Will Apple give up a decent mark-up on iPhones to subsidize prices to boost market share so it can get back a few measly bucks from its pidliing share of the subscription?
Race for the bottom.
Sounds... stupid?
Sacconaghi is an Apple analyst but he says he has not confirmed the price cut plan with Apple or AT&T.
But of course... no confirmation.
The mass market however, is a double-edged blade as Razr observers will note. Razr’s ride to popular glory was followed by a plunge into ignominy as the price of the phone went to zero, a precursor to the downfall of the Motorola’s mobile phone business. But that is one Razr parallel Apple fans aren’t likely to make.
Wait... you knew it would be useless to race to the bottom yet you recommend Apple join the race?
Slow news day, huh Scott?
