An open letter to Steve Jobs

Dear Steve Jobs,

I've been hearing a lot of talk about you in the media lately and not being the sort to gossip, I thought I should bring my concerns directly to you. You see, I've noticed that you're a fan of the open letter, so I figured that this would probably be the best way to reach you. Call me old fashioned but it just seems like the honest thing to do.

It seems to me that you've had a pretty eventful week, Steve. Can I call you Steve? Cool. Anyway, you launched those new iPods on Wednesday, which was pretty huge. I was expecting some of those new models but I definitely didn't expect all of them to be unveiled at once like that. And speaking of surprises, how can I forget the $200 iPhone price drop? You certainly pulled that one out of a hat, that's for sure.

So with all the new gear and the price drop, you'd think that everyone would be happy, right? If only life were so easy. It seems that you were bombarded with angry emails from loyal Apple fanatics who demanded to know why they paid $600 when a price drop was waiting in the wings all along. If it was me, I would've just said "hey, prices change, that's life" or something to that effect. But you had something different in mind, didn't you? In the interest of "taking care of our early iPhone customers," you decided to offer $100 in store credit to all of the folks who paid full price for the iPhone as a sort of goodwill gesture.

Talk about surprises. A move like that is pretty much unprecedented in the consumer electronics industry. My friend Brian even went so far as to call you the "Willy Wonka of tech" (don't worry, I'm pretty sure he meant that as a compliment). Still, even Willy Wonka had his detractors and so do you, Steve. Enter Apple shareholders, the Veruca Salts of this story. Those guys were apparently less than impressed with the iPhone pricecut--my guess is that they took it to be indicative of weak sales. The day of the pricecut, Wall Street took a cool $5.5 billion off of your market cap and following the refund announcement, we saw them take another $1.5 billion off the top. And from the looks of it, they're still feeling pretty pessimistic.

Now I'm no investment expert and I don't own any Apple stock (or any stock, for that matter) but I'm not too worried. I know that you've got a few tricks up your sleeve: you were making 50 percent margins on that phone at $600 and as anyone who has ever been in an Apple store can tell you, you can't buy much for $100. So I know that this isn't going to make a dent on the bottom line. Worst case scenario, you'll have to give out a few free boxes of iPod Socks. No sweat.

So here's what I'm concerned about: why did you do it? The easy answer is that you simply wanted to repay existing customers for their loyalty while attracting new customers to the phone. Fair enough. But I know well enough that a great deal of strategy goes into every public move that you make. Robert X. Cringely (Remember him? He was that joker who turned down shares in Apple for a few hundred bucks) called the rebate "a calculated and tightly scripted exercise in marketing and ego gratification". I won't comment on your ego, Steve but I do agree with Bob when it comes to marketing.

I'll tell you why: because somebody has got to set the stage for the next iteration of the iPhone. When the iPhone launched at $599, it was a high-end piece of technology. The price was ridiculous but so was the product; thus, people were willing to pony up the dough. And what now of the iPhone? It's priced at $399--not that much more than the iPod--and there's a cheaper iPod that boasts all of the same features sans calling. You have to make us want the iPhone again Steve and the only way to accomplish that is by once again repositioning it as a high-end device.

That's why I think that the dudes at Engadget might be right: you might just pull a 3G iPhone out of your pocket in Paris on the 25th. You promised an iPhone for Europe by the end of the quarter, the agreements are signed, all that's left is to launch the thing. And while you may have been able to convince consumers in the technologically lagging U.S. market that we don't need 3G, I'm pretty sure that you know you won't be able to pull off the same trick in Europe--especially not with a $600 phone. That's why the European iPhone will sport a 3G radio and, quite possibly, 16GB of flash like the high-end iPod Touch. And after the uproar about the price drop, you know that you won't be able to get away with not releasing the same phone in the U.S. so you'll have no choice but to introduce it over here as the new high-end iPhone.

So there you have it: Europe gets the iPhone, the U.S. gets 3G and the low-end crowd gets iPods and EDGE iPhones for half the price--everyone's happy, right? Well, maybe not. As you surely know, there's likely to be a few malcontents out there somewhere who'll complain. But really, no one will have a valid reason to gripe--either you bought your iPhone for $399 or you got a $100 refund. And if you really want the 3G, you'll go out and pay $600 for the new iPhone as quickly as you bought the old one.

Sure, Steve, it would be totally unprecedented if you released a new version of the iPhone just a few short months after introducing the device. But remember: both the price drop and the refund were equally unprecedented. Come to think of it, most everything you've done during your career has been without precedent--both the good and the bad. I guess that's why so many folks love your company so much.

Take it easy,

- Mehan