Price cut after price cut as Apple tries to woo switchers

In the keynote speech Monday that opened Apple's Worldwide Developers Conference, it became clear the company is tackling the price question head on.

The best example of this new attitude is the decision to keep the 8GB iPhone 3G but sell it at $99. That was the most aggressive price move it made on Monday. But Apple was price conscious in other ways, too: It upgraded its 13-inch unibody MacBook to specs worthy of its more high-end MacBook Pro line, while also reducing the price. The MacBook Pro 15-inch and MacBook Air also received price cuts. The new Mac OS X 10.6, known as Snow Leopard, will cost current Mac OS X 10.5 owners just $29 to upgrade when it becomes available in October.

The price cuts on the MacBook lineup and the iPhone 3G are clearly intended to bring more "switchers" over to the Mac and iPhone platforms.

There are two things that lowering the price of the iPhone to $99 does: it broadens the potential base of people who can now afford the iPhone. It also kneecaps Palm. The $199 8GB Palm Pre has been touted as a potential "iPhone killer", or at least a very nice alternative to Apple's device. But the Pre is now $100 more than the comparable device from Apple. That could make the decision very easy for people who are on the fence.

As of the beginning of the year, Apple owns just under 11 per cent of the smartphone market, and that could increase exponentially now.

When Apple cut the iPhone from $399 to $199 last year that was also a 50 per cent price reduction. Apple watcher and Piper Jaffray analyst Gene Munster notes that the price cut last year tripled the sales of the device, from 4.7 million iPhones sold in the three quarters before the price cut, to 15 million iPhones sold after the release of the $199 iPhone 3G.

Whether Apple can repeat this is going to be determined by a number of factors. Of course, the economic environment isn't the same as it was a year ago, plus far more people have iPhones already, and there are more smartphones on the market now.

In any case, the decision on price shows Apple is being aggressive, and it makes a statement about the kinds of customers it is courting.

Original article: Can Apple beat the too-expensive rap? from CNET News.com