Image: Steve Jobs
Paul Sakuma  /  AP
Apple CEO Steve Jobs announces in San Francisco that the 8GB iPhone will now sell for $399.
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updated 9/6/2007 7:29:33 PM ET 2007-09-06T23:29:33

Apple Inc. CEO Steve Jobs apologized and offered $100 credits Thursday to customers who shelled out $599 for the most advanced model of the iPhone this summer, only to have the company unexpectedly slash the price $200 in a push to boost holiday sales.

In a letter on the company's Web site, Jobs acknowledged that Apple disappointed some of its customers by cutting the price of the iPhone's 8-gigabyte model and said he has received hundreds of e-mails complaining about the price cut.

But Jobs added that "the technology road is bumpy," and there will always be people who pay top dollar for the latest electronics but get angry later when the price drops.

"This is life in the technology lane," Jobs said.

Jobs said Apple will hand out $100 credits for Apple's retail and online stores to any iPhone owners who aren't eligible for a rebate under the company's refund policy. They policy covers those who bought their phones within 14 days of the price cut.

An Apple spokeswoman said the company did not have an estimate of how much the credits would cost Apple.

For many of the iPhones early adopters, money is not and never was an issue, however. They were after the gratification of knowing they were among the first owners of something that was cool, even revolutionary.

"If they told me at the outset the iPhone would be $200 cheaper the next day, I would have thought about it for a second — and still bought it," said Andrew Brin, a 47-year-old addiction therapist in Los Angeles. "It was $600 and that was the price I was willing to pay for it."

Enjoying that period of being among the first — before the prices drop and reach the masses — is part of the pleasure, Brin and others say. And in much of the tech world, the usual expectation is that six months will pass before there's a major price cut and a year before a next generation of the product — usually an improved version — appears.

The looks of envy and attraction are an elixir.

"It's better than a dog, if you want to meet people," Brin said of his iPhone.

Jack Shamama of San Francisco, who was among the thousands nationwide who lined up for iPhones on the day they first went on sale, said he got some smug text messages and phone calls from friends on Wednesday after Apple announced the price cut.

But Shamama is taking the price cut in stride, saying such cuts are the wages of being an early adopter.

Gadgets — and food — are the 33-year-old online marketing consultant's splurges.

"It's the equivalent of having that season's handbag," said Shamama, who goes through cell phones as quickly as some people do shoes, comfortably shelling out hundreds of dollars per handset every six to eight months.

He's got a collector's item in one of the first Palm Pilots. And, even though he didn't even want one at first, he felt compelled to buy a Nintendo Wii game system last November — paying a friend of a friend $400 to get the $250 machine — after he heard how scarce they were.

Shamama bought the BlackBerry Pearl — another trendy smart phone — only months before the iPhone was unveiled.

"My biggest fear with any product is that it's going to become obsolete, and that isn't what happened this time," Shamama said.

Immediately after the iPhone price cut was announced Wednesday, Jobs' tone was less conciliatory. He tartly rebuffed criticism about whether some of Apple's most die-hard fans would be miffed by the company's latest actions.

IPhone owners who bought their device that morning, he said an interview with USA Today, "should go back to where they bought it and talk to them. If they bought it a month ago, well, that's what happens in technology."

Jobs then apparently had a change of mind. The company is making the right decision by lowering the iPhone price, he said in his letter Thursday, but needs to "do the right thing for our valued iPhone customers."

"(W)e need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price," he said. "Our early customers trusted us, and we must live up to that trust with our actions in moments like these."

Analysts said Thursday that Jobs erred by initially dismissing the gripes of people who bought iPhones early, many of whom are Apple loyalists who felt insulted they were being overlooked in the company's zeal to sell to a broader audience.

"In the course of a day, he probably got an earful and a better sense of the extent of the discontent on the part of these very, very loyal customers," said Charles Golvin, an analyst with Forrester Research. "On second and third thought, he realized these were probably the customers you most want to make sure are satisfied and retain a very positive impression about Apple overall, not just the iPhone."

Under Apple's refund policy, customers who bought an iPhone within 14 days of the price cut can get a refund of the price difference if they have the original receipt. Those who haven't opened the phones can return them for a full refund.

The price cut — and the phaseout of the 4-gigabyte iPhone, which retailed for $499 — came less than 10 weeks after the two products hit the market June 29 and angered some iPhone users.

Investors were also rattled by the news, sending Apple's shares down a total of more than 6 percent over the past two days, a drop that has wiped out about $8 billion in shareholder wealth. Apple's stock closed Thursday at $135.01.

Some worry that Apple is cutting the price to make up for waning demand, a concern Apple countered by saying the device is now affordable to more people and has the potential to be a blowout seller this holiday season.

Apple has said it's on track to sell 1 million iPhones by the end of the current quarter.


Associated Press Technology Writer Rachel Konrad contributed to this story.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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