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Apple vs. Apple

Shares fall because of iPhone price drop, but who's Apple really competing against?

The Wall Street Journal says that the iPhone price drop spooked Apple investors. Clearly something did, but if that really is why, it's some slightly goofy thinking on investors' part. But it also gets back to a point the Macalope was making a few months ago about why Apple might not want to release a touch-based iPod too soon. It bears repeating:

If Apple shows gigantic iPhone sales that drop off dramatically, expect howls of "I told you so!" from the usual collection of clowns, but also some serious questions from serious analysts wondering if that toe Apple's dipping in the cell phone market is finding the water a little cold.

What the horned one didn't figure on is a heavy iPhone price cut to keep it on par with the new iPod offering, but this is really the same effect. Apple has long had products that competed against each other, but this is the first time (in a long while anyway) that it's had to report the sales figures separately.

But the point is, as all signs previously have pointed to strong iPhone sales to date, this isn't about competing with other smart-phone providers. It's about competing with iPods. A $599 8GB iPhone just wasn't tenable anymore with a $299 8GB iPod Touch. Now people only have to pay a $100 premium for the joys of a long-term relationship with AT&T.

So, the brown and furry one is scratching his antlers a little bit about why investors are so concerned about Apple eating its own lunch.

Apple's trying to have its cake and eat it too. It wants to sell lots of iPods and lots of iPhones. As Steve Jobs says in the Journal piece:

"It's time to be as aggressive as we can be," Mr. Jobs said. "If we're not, then we have to wait another year for the next holiday season."

The Journal leads with the "is Apple having trouble competing in the cell phone market" and doesn't get to what the Macalope thinks is the real reason for the price cut until the 18th graf.

Some analysts said the iPod Touch could damp iPhone sales by providing an alternative for consumers who want the iPhone's multimedia features without a two-year commitment to cellphone service through AT&T. AT&T's Mr. Coe said the new device's release won't affect what the company expects to be strong demand for the price-reduced iPhone.

Sure. The "price-reduced" iPhone.

One way or another this will get sorted out when iPhone sales figures for the current quarter are reported next month.

UPDATE: See if you don't agree with the pointy one that some of this "analysis" is a little goofed up.

ZDNet's Larry Dignan has some analyst quotes.

Bank of America:

To us, the most significant product announcements concerned the iPhone-- 8GB now $399 vs. prior $599 and 4GB discontinued...

Whaaaa? Did Bank of America sleep through the Nano, the iPod Touch and the wireless iTunes Store?

JP Morgan:

Overall, the event was largely in line with expectations with the exception of the price cut on the iPhone.

So, you expected a $299 iPod Touch and didn't think Apple would drop the price of the iPhone? How does that make any sense?

Disclaimer: The Macalope holds an insignificant number of Apple shares.