Weeks after surprising many industry analysts with the low price of the entry-level iPad, Apple executives are sending out hints that Apple may lower prices further to boost sales of the new device. At a closed door meeting with financial analysts
, Apple officials reportedly said that they will be "nimble" with pricing in case the iPad doesn't sell as hoped. Recent analyses of the parts used in the iPad indicate that Apple has plenty of room to drop prices.
When the original iPhone was released, it cost $599. Just a few months later, Apple shaved $200 off the price. While the company is well-known for its high profit margins on everything it sells, Apple has not been above cutting prices when it wants to see big sales numbers, especially on new products. The original iPod, too, cost $400 and only held 5GB. And Steve Jobs has specifically said in the case of the iPad that he wants "to get this into the hands of as many people as possible." many early skeptics changed their opinions after actually getting to play with the iPad, using words like "gorgeous" and "blazingly fast."
Credit Suisse analyst Bill Shope said that Apple "wants the iPad to be the best device for a few key use cases," like browsing the Internet, a new class of full-screen apps, and for playing video and reading e-books. According to Shope, Apple is ready to drop price if demand for the device doesn't take off. “While it remains to be seen how much traction the iPad gets initially," Shope said in a note to his clients, "management noted that it will remain nimble (pricing could change if the company is not attracting as many customers as anticipated)."
Market research firm iSuppli released an analysis today
that estimated the costs of a $499 iPad at $219.35. Broadpoint AmTech analyst Brian Marshall had earlier estimated
a cost to Apple of $270 on the low-end model, with even higher profit margins on the more fully-featured iPads; in particular the 3G models which add $130 for a 3G radio that costs just $16. The 64GB flash in the top of the line iPad costs Apple only $76, but boosts the selling price by $200.
If anything, this approach may backfire for Apple: I wasn't that eager personally to grab one of these the minute they go on sale, but with these reports, I'm even more inclined to wait.