Free iPhone: Apple apologises to iPhone users

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Apple on Thursday offered a $100 store credit and an apology to early adopters of its iPhone mobile handset after they reacted angrily to a large price cut within 10 weeks of its launch.

Apple said on Wednesday it was discontinuing a four-gigabyte model and cutting the price of its 8Gb iPhone by a third – from $599 to $399.

The move, designed to boost sales during the holiday season in the US, was an unusual one for the company. It commands premium prices for its products and tends to add features to them to justify maintaining existing prices.
IPhone owners, some of whom queued for days to buy the handset before it went on sale on June 29, had by Thursday besieged Apple with complaints that they had been taken advantage of and overcharged.

In an open letter on Apple’s website, Steve Jobs, chief executive, said he had received hundreds of e-mails from iPhone customers upset at the price being dropped and had read every one of them.

Mr Jobs said the company stood by its decision to slash prices so soon after the iPhone launch.

“This is life in the technology lane,” he said. “If you always wait for the next price cut or to buy the new improved model, you’ll never buy any technology product because there is always something better and less expensive on the horizon.”

However, he apologised for disappointing some buyers and acknowledged that the company needed “to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price”.

“Our early customers trusted us, and we must live up to that trust with our actions in moments like these.”

Apple’s price cut had also disappointed the market. The company’s shares fell 5 per cent on Wednesday on concerns about the effect on profitability and the decision to cut the price so soon. Apple shares closed a further 1.3 per cent lower on Thursday at $135.01.

Analysts at Citigroup said in a note: “While the Street is likely to view such an early price cut as a negative for Apple, we actually view the cut as a positive given our expectation that it will significantly expand the available market over time.”
Apple has targeted sales of 10m a year for the iPhone and says it is on track to ship its millionth unit this month. It is only on sale in the US; a European launch is expected once Apple announces deals with mobile operators.

In the meantime, a “phone-less” version, the iPod touch, will be launched worldwide in the next few weekse, unhindered by the need to strike deals with carriers.