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In iPhone-Sales Tizzy, Price Cut Minimized

Marek Fuchs

But the "news" this week (yes, I smugly used scare quotes) that Apple has sold its millionth iPhone and the "conclusion" that this puts to bed worries about last week's enormous surprise price cut won't pass without me flaunting my own disagreement.

To review, Apple last week announced an alarming price cut, a big departure for a company that, unlike more common electronics peddlers, never really had to compete on price. Price cuts of course being the biggest long-term enemy there is of profits, not to mention high-end brand names.

Just as bad: The price cut caused its most loyal customers to rebel, made Steve Jobs rush out an apology and store credit to make amends and called into question whether Apple had tarnished its vaunted mojo going forward. The next time it releases a product to great fanfare, will people for the first time say: "I'm not going to rush and be a chump. They'll cut the price by a third in a few weeks."

Anyhow, along the way during this most messy week, Steve Jobs was forced to declare that, yes, Apple would make its goal of selling a million iPhones by the end of September.

Then along came this Monday and out came a release from Apple: They had sold that millionth phone. And that, my friends, is when the business media, God bless their gullible little hearts, kicked into gear. All the possible troubling long-term issues brought to the fore by the price decrease? Don't sweat it, dudes. They sold the millionth phone ... which, uh, they already said they were about to do. But break out the bubbly!

Said the Financial Times in a headline: "Apple quells new gadget sales fears."

Motley Fool got all cool: "A Cool Million for Apple," they wrote in their headline, before filling it out in a hyperventilating lead:

Well, that didn't take long. Not even a week after cutting the price of the device by $200, Apple (Nasdaq: AAPL) this morning announced that it has sold its millionth iPhone. Time elapsed: 74 days.

Naturally, Apple is ecstatic. Quoting CEO Steve Jobs from a statement issued this morning: "It took almost two years to achieve this milestone with iPod. We can't wait to get this revolutionary product into the hands of even more customers this holiday season."

Investors believe that Apple will; they bid up the shares more than 2% higher in early trading.

For the record, I also believe the iPhone will be a runaway success.

So is the issue of where the price cut leaves Apple dead? Not on your Nano.

The price cut called into question whether the iPhone's sales were slowing in recent weeks. Hitting the million-sold mark does not dispel this. Could Jobs have been facing the realization in the past few weeks that he could not match his 2008 goal of selling 10 million iPhones without a price cut the size of Bolivia? Quite possibly.

And while I do believe they would have hit the 1 million mark without the price cut, all this talk about hitting it in 74 days could have been affected somewhat by the price cut. And as the "BreakingViews" column in The Wall Street Journal smartly pointed out, Jobs, who has a history of toying with expectations, always aims to beat.

So while he could have hit the million mark without a price cut, was passing it with typical flourish not happening unless Apple shaved prices? And is making a bad long-term business decision in order to come out on top of the short-term expectations game worth it?

Moreover, does making the million mark change the fact that Apple has transformed itself into a company that both competes on price and partners with every Tom, Dick and Howard Schultz -- from AT&T(T Quote) to Starbucks(SBUX Quote) -- thus giving up two elements of the control they have been famous for keeping?

Much was also made about how Apple hit one million sold in iPhones quicker than iPods. But it's a false comparison. It essentially created the market for iPods, a task that takes longer to build but has more lasting financial benefits. Cell phones are more common, making them easier to peddle at the outset, but more difficult going forward: You face competition on price and bells and whistles wherever you turn.

Interesting, then, that while I was reading about fears quelled in the Financial Times, a separate article called "Vodafone unveils new range" is all about how Vodafone(VOD Quote) has prepared to compete with the iPhone in the U.K. by unveiling a range of mobile phones for Christmas with an "all you can eat" music download service.

But Apple hit that one million mark. So break out the bubbly -- right after you send me an email telling me why this was the dumbest, most misguided column you ever read and that if St. Steve knew he was going to have dandruff, he'd wear a white shirt. But once in a while, even a saint falls or, at least, mistakenly wears a dark shirt.

Finally, Apple loyalists? Please remember that blind emotion is no friend of a good stockpicker. Once you cross from being a stock holder to a stock booster, you set yourself up for a mistake.