haha... clever analysis of the numbers. Too bad it unlikely has anything to do with why their stock dropped. I'm guessing a combination of a down stock day (due to job, housing and subprime mortgage concerns) in combination with a high price point (over 100) and no groundbreaking annoucements (as you pointed out in another post, you nearly hit everything announced) caused some investors who were shorting the stock to sell.

IT SHOULD HAVE DROPPED 33% TO MATCH THAT IPHONE DROP!!!

Actually, investors reacted negatively to the price drops. $50 drop on the nano (4GB went from $199 to $149), $100 drop on the Classic (80G went from $349 to $249), and a $200 drop on the iPhone. Investors like to make money, and they don't see a 40% price cut on the iPhone just a month and a half after its release as a positive thing.

But, Wall St. can be pretty crazy, too, as the price cut pretty much guarantees a HUGE Christmas season for the whole iPod family. Just wait, Wall St. is always knee-jerk reactions, it'll more than come back.

I think the lack of announcement regarding the viability of the iPhone as a business phone was also disappointing.

As they say,

buy on rumour, sell on fact!

The iPhone price drop made all the jumpy types nervous that Apple overreached br moving into the mobile handset business.

They see the drop as a sign that Apple isn't hitting their numbers, despite Steve's remark that the 1,000,000th iPhone will sell this month.

Personally, I like AAPL, and I like it even better at a discount.

nice! that's good analytical skill, yo. i still can't afford an iphone.

Obviously, the drop reflects that this corporation has just chopped 33% off the price of its sexiest new product in only 2 months of the product's life cycle, a troublesome sign for the future of the corporation's entrance into the cellphone market. Apple seriously misjudged the appetite for such an expensive phone. Alternatively, I'd argue, they screwed up several aspects of it as pointed out repeatedly on the Internet, which led many people who have the money to feel like reviews were mixed, and to wait for the next gen or for a big price cut. Having no next gen in the pipeline for Xmas, this was the only thing they could do. It reeks of desperation.

Seems like a normal stock market reaction to me. People buy, buy, buy in anticipation of an Apple announcement, driving up the price. Then when they get the news, they sell, sell, sell to try to make a buck. But if everyone already bought and now they're all selling, price goes down. Pretty standard stuff.

Maybe they shouldn't have screwed their early iPhone adopters so soon... I have a bad taste for the rotten apple today and I am a huge fan boy.

Its because all the fanboys are pissed (myself included).

We're not buying the new fucking iPods if we got screwed out of 200 bucks.

Take our loyalty and shove it Steve.

Of course stock price is going to take a hit, they just GUTTED the profitability if the iPhone. Wait and see though. As more iPhones are sold and penetration goes up, so will revenue. Might be a great time to BUY Apple stock. I can't wait to see what Jim Cramer has to say. Maybe I'm right, maybe I'm not.

I was looking at the ticker, and the stock started to drop before the event even STARTED to announce any iPods.

[finance.yahoo.com]

Note the spike at 1:30. Just some people cashing out on the stock.

It was on the rise for the past week, so why not cash in? After all this was the same stock that was 35 bucks only two years ago.

@bandit: I definitely agree that such a dramatic price cut so quickly is a discouraging sign. I personally can't consider it desperation, but it does bring up questions. Do they have something else up their sleeve? Are sales not on track with predictions? Or something else we can't determine? The worst part with such a quick price cut is it can alienate (or upset) the early adopters and Apple fanbase. My other question is, with a price of 399 for a iPod touch and a 399 price for an iPod, who is willing to sacrifice functions (phone, email, etc) for storage (8GB more). Do these price points make sense?

or rather 399 for iPhone, not iPod... D'oh!

Isn't the real profitability of the iPhone in the cut that Apple gets from AT&T on every monthly iPhone bill, though?

...I;m pretty sure this was due to the $200 off the iPhone.... I too feel ripped off by a company that slashes 1/3 off the price of their most inovative product right after most of the loyal fans purchase the product... especially after most people had to sign a contract for 2y to use the product.... also eventhough the iphone is really cool especially all he new apps we've been getting (not thanks to apple) my last windows mobile 6 phone did more things was more bussinedd friendly and had TOMTOM installed.

Yo, cost of iPhone hardware drops significantly when it shares components with some of the iPod line. I think you see that reflected in the drop.

I don't remember Apple calling iPhone a business phone, ever.

The stock drop can be directly attributed to the price drop of the iPhone. Their costs have not lowered, but they're reducing their own margin. Yes, they will make it up in volume, so the stock sell-off is likely temporary, but in light of the announcements, it's the right decision.

Regardless, consumers don't make buying decisions on what Wall Street thinks. What's good for the consumer isn't always good for the investor.

Buy on rumor, sell on news.

Umm.. this is kind of drop has been standard market reaction to apple announcing anything for ages... while 5 points does seem like a bit much, but it's been an on going joke that the market always punishes apple for innovating... until it sees the quarterlies anyway.

buying opportunity. This is Stock Trading 101.

There is some serious backlash from the iPhone price drop - several news outlets are starting to nail the story and USA Today quoted Jobs as saying 'That's technology' - which dropped the ticker even more in after hours trading.

i think we'd all better keep our day jobs, provided said day jobs are not in the financial sector.

should we expect a 16GB iPhone, priced at $599, for the holiday season? seems like a perfect combination of the iPhone's capabilities and the touch's capacity. . .

Spiked up on the news that they would make an extra $1 for doing nothing other than re-authorizing segments of purchased music as ringtones. That's all extra profit. Then the stock sank on all the other news, including releasing an iPod that completely cannibalizes iPhone sales, and the huge and completely unexpected iPhone price cut that can only indicate trouble.

@bandit:

Having no next gen in the pipeline for Xmas, this was the only thing they could do. It reeks of desperation.

If you think the howls from iPhone early adopters were loud because of the price cut today, imagine if Apple had announced the iPhone 2 instead.

I agree, the profit from the iPhone line is going to come from monthly revenue.

I also see this as a precurser to the pricing that Europe will see on the phone. It'd be an unrealistic price compared to other phone prices over there compared to what it actually does.

Also, the internal communication (AT&T) I saw dates the pricing of the 8GB model to Dec 31, 2007 so expect a newer model soon after, if not before...

@killershatner: So, can you tell me how you, as a fanboy, affected the stock price? Exactly how much of your AAPL did you sell?

Well Duh! Who woulndt b pissed off at a 8/16gb Ipod release!

For some bizarre reason, much of the so-called "disappointment" in the iPhone has to do with the "low" reports of activations of the phone on AT&T. That should have little to do with Apple. What have the actual sales been? We've seen articles of the iPhone on sale in China, so there's no telling how many unactivated phones are sitting around outside the country, but have been PAID for already by entrepreneurs hoping on an activation crack to earn them a premium.

jesus, if half of you worked on wall street there would be some very rich people taking your money. This seriously had nothing to do with the price drops. Investors could give a rats ass as long as their margin is in the black. Apple is in no trouble at all and neither is the iphone.

The stock price drop had little to nothing to do with the announcement of the iphone price drop. I was following the live blog and stock price simultaneously... the price began dropping pretty dramatically even before his Steveness got up to the ipod classic announcement, rebounded slightly when the touch was announced, and then immediately began dropping steadily again. The iphone announcement didn't come until the very end of the presentation. Plus, I think wall st. will like this new price point... they'll probably sell a hell of a lot more units this way. Heheheh... I said units.

I don't think the price drop on the iPhone was the issue. If it was, then Wall Street is more fickle than I thought they were.

Even with the $200 price drop, the iPhone is still one of the most expensive phones WITH signing a 2 year contract.

Just about every phone on the market from all carriers is heavily discounted, combined with a 2 year contract.

I think the fickle stock drop has to do with the investors getting their hopes up for the ultimate iPod, then seeing one or two things they didn't like, selling like crazy, driving down the price.

people who sold now; not so smart! cheaper iphones will equal more sold, making up for the lost revenue stream plus they opened up another avenue with the starbucks deal and the improved ipods. also, leopard is coming next month, ensuring more computers sold, resulting in higher stock price (coupled with the increased ipod/phone sales)

Haha - Gotta love it :)

I hate (envy) being the one to bring this point to light, but a higher boom count, according to the calculation would have only had the effect of dropping Apple's stock further... I think we, and by we I mean those of you who own Apple stock, should be thankful Steve only let loose one boom today.

Fanboy riots everywhere over the price drop. I'm praying for a $200 credit which some people are already getting even though it's past their 14 day return policy.

@bandit
I agree. Apple probably has a warehouse the size of Rhode Island filled with 8gb iPhones that didn't sell for $600.

It's all in the presentation.

@ BDKENNEDY1

"I agree. Apple probably has a warehouse the size of Rhode Island filled with 8gb iPhones that didn't sell for $600.
It's all in the presentation."

Bzzzzt! Wrong answer. No one is mentioning the fact that they completely dropped the iPhone 4GB model. When I purchased my 4GB iPhone it was clear that the 8GB models selling way more units, probably something like 10 to 1. By dropping the 4GB model, Apple saves tons on manufacturing cost and, in turn can pass the savings on to the customers.

Apple could have easily continued to sell the iPhone at $599.00 and made a killing throughout the holiday season. The iPhone is ridiculously popular and will be even more so now that the price has dropped. I don't know why so many of you here are in such denial over that fact.

I don't see how Apple could have avoided the price drop on the iPhone while offering up the same basic thing in the iPod Touch sans a camera and phone capability.

I have not really wanted an iPhone at all and was waiting for the iPod Touch to come out so I would have the option of buying that instead since I didn't need the camera and phone... But now that the iPhone is so close in price it almost seems foolish to buy the iPod Touch when you could unlock the iPhone and at least have a camera in addition to an iPod.

It's just a bit disappointing in some ways but I don't see how they could have avoided it. And by the way, where is the virtual scroll wheel???

@bandit: how did all of you miss the news that the iPhone was outselling every other smartphone? Oh, does your phone not allow you to natively browse news websites?

Seriously, everyone predictided a big price drop, there was even precedent as seen in the case of the RAZR. Notice: the sky is not falling.

Seriously... the price drops or disappointments most likely have NO correlation to the fall in share price.

Perhaps some investors are finally getting smart and realizing that Apple is a TERRIBLE investment. High P/E ratio? No dividend? Tons of hype?

And come on, WE are wall street. It's not like you have to join a club or pass an interview to be a part of wall street. go to any online brokerage and put your money where your mouth is.

@KingSnakeX4:

Investment Banker here... And actually, the price drop did not signal a fall in profits directly, but a possible slowing in demand for something that Jobs wants to sell 1 million of in very short order. Dropping a product's price by 1/3rd while it is still a novelty item shows a lack of confidence on Apple's part of there ability to do so. But thanks for handing out investment advice to the masses... I'm sure you've watched the movie Wall Street at least a couple of times, so you're probably right...

@newgalactic:

Please, for my sake, don't refer to Jim Cramer's advice as anything other than advice. In fact, don't get your investment advice from TV. Read (I can furnish a reading list if you'd like) develop goals, and invest in a manner that suits you. If you try to get rich quickly, you will more often than not, get poor slowly.

That being said, it is propably a good time to buy a few more shares of Apple, they will bounce back once earnings for the Fall and Winter are announced, its just jitters right now.

@Secret Agent Man: A lot of this feels like correction to me. I'm curious as to your opinion, considering you are an investment banker (or at least claim to be, after all this is the internet). A lot of people bought Apple's stock over the last several months on speculation, not fundamentals and this just seems to be a case where some people are taking their short term returns and cashing in.

@ester:

Totally right, you never know who is who online. I assure you I'm a professional, but I won't give out details as to where I work, as I post on the Consumerist frequently and I'd rather not risk my job.

You could very well be totally be correct. I'm not an expert on Apple stock, and looking at ratios I'd say that it may very well be a correction (although ratios and fundamentals mean little to a large percent of casual apple investors), however the stock is up due to some hope that there will be some future revenue influx. If apple's bubble is going to burst, as it may at some point, it may not happen for awhile, and the high value will be sustained for awhile.

As far as the drop being due to people cashing out, 2 things to say there.
1. People are very fickle, if a stock goes up, investors feel as if it will continue to go up, so the effect there is marginal.
2. If people are happy with gains and cashing out, and the company is expected to do well, other investors will buy their shares and ride he current up.

So what were seeing is likely a change in confidence, not a mass exodus due to satisfying returns for investors. The market is very unpredictable, and everyone has an opinion, the key is to protect yourself by diversifying. You will be far more likely put your kids through college with a diversified portfolio than with a couple of hot stock tips.

I found these top 10 reasons why Apple might have made the iphone price cut on another blog, and found them interesting:

1. Sales are slowing, and a price drop will re-invigorate them.
2. Other smartphones are entering the market and a $399 price tag kicks those where it hurts.
3. iPhone is a classic platinum turkey -- a high-end phone that sells a million units rapidly but then quickly loses momentum.
4. The new iPod touch was likely to undermine iPhone sales.
5. Apple early adopters would have paid any price. $600 was just short term profit maximization for the launch.
6. Apple has reached a milestone that can justify a price cut. Development costs have been recouped. (It'll be a lot cheaper to produce the next million iPhones than the first, so Apple hasn't given away its margin.)
7. iPod Touch and iPhone share certain parts, thus bringing manufacturing costs down for both products.
8. Apple promised AT&T the price cut if they could offer the iPod touch this holiday season.
9. If Apple learned anything from the Mac war with Wintel, it was that maintaining hardware margins at the expense of marketshare was a mistake.
10. Clearing out inventory to make way for a 3G iPhone ASAP.

@Secret Agent Man:

I'll ignore that last sentence. I've never seen Wall Street. I'm no investment banker nor do I have stock in Apple. And I missed the part where I gave investment advice. Lack of confidence on Apples part or not, that is up to interpretation. But hey, wtf do I know?

@KingSnakeX4:
Feel free to ignore it, sometimes I'm feisty, I meant no harm. The Cramer thing set me off more than anything... I can't stand that guy.

Maybe its got something to do with people being tired of Apple and it's style-first, overpriced-ness. Especially after they kicked people in the balls with that iPhone price-drop. Don't dump you stock yet, but Apple is looking a lot like MS these days.