14 DAY TRIAL // Apple's iPhone price cut surprised everyone outside the company, not only because of its timing but also because of the actual amount shaved off. The price of the iPhone was not seen as being overly high, considering the capabilities of the device and traditionally Apple has not been one to lower price points too much.
The iPhone has been widely regarded as a very special device, and indeed it is, from many points of view. The special position that the iPhone has placed Apple in with regards to the mobile phone industry may allow the company to do things that it simply can't do with any of its other products. It was already known that carriers would pay Apple a percentage of the subscription fees of iPhone users, although the exact percentage is unclear and varies from carrier to carrier. While the exact numbers remain elusive, analysts believe that Apple is making so much money from these contracts that the company could even afford to sell the device at a loss and still make a profit.
While Apple has never been a company to sell at a loss, the subscriber revenue is clearly enough to cover the cost of giving early adopters a $100 rebate. Furthermore, because the company is not entirely reliant on the margins of the hardware alone, Apple could very well cut iPhone prices as low as they will go while still making a small profit and get the bulk of the cash from all the new subscribers that the cheaper devices will generate. Considering the fact that a new version of the device is not expected until next year, Apple's manufacturing costs will also continue to go down, giving the company yet another buffer that could be used to lower prices and sell even more units.