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Apple's Jobs Defends iPhone Price Cut

The company will give earlier buyers a $100 credit.

Apple (AAPL) - Get Report Chief Executive Steve Jobs defended the company's decision to cut the price of the iPhone -- a move that provoked outcries by those who paid full price for the two-month-old device.

Jobs posted an open letter on Apple's Web site, acknowledging that consumers were upset that the price cut came so soon after the device hit store shelves. But he stood by the company's decision and offered a $100 store credit as an olive branch to those who paid the full $599 for the 8-gigabyte version and $499 for the 4-gigabyte version.

"First, I am sure that we are making the correct decision to lower the price of the 8GB iPhone from $599 to $399, and that now is the right time to do it," Jobs wrote.

"iPhone is so far ahead of the competition, and now it will be affordable by even more customers."

Jobs announced the price cut at the end of a Wednesday conference, which was focused on highlighting Apple's updated iPods and the new iPod touch. Jobs also used the conference to announce a new partnership with

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But the iPhone price cut quickly overshadowed the news as investors fretted over the impact on sales and profit, while chagrined iPhone users stewed over paying the original price. The company's stock price tumbled over 5%, and, according to Jobs' letter, hundreds of customers sent him emails voicing their anger.

In his letter, Jobs said that price cutting is routine for tech products.

While that's especially true in the competitive cell phone market -- customers are used to it, and Apple investors had anticipated an eventual price cut -- the aggressive pace and steepness of the initial price markdown took everyone by surprise.

"We want to do the right thing for our valued iPhone customers," Jobs wrote in his letter. "We apologize for disappointing some of you, and we are doing our best to live up to your high expectations of Apple."

Apple shares closed down $1.75, about 1.3%, to $135.01, off lows hit earlier in the day.