From Fox News:
To further compound the chagrin for early adopters of the iPhone, the price of the 8-gigabyte iPhone was cut from $599 to $399 — and the 4-gigabyte one, which had been priced at $499, was eliminated altogether.
"We want to put the iPhone in a lot of stockings this holiday season," said Jobs.
Analysts, however, were scratching their heads about the drastic iPhone price cut, which took place less than 10 weeks after the much-ballyhooed device hit stores to great fanfare — and great sales.
"People who bought the iPhone weeks or months ago must really be annoyed, and with good reason," Tim Beyers, an analyst at The Motley Fool research and investment group, told the Associated Press. "They might think twice about being the first to buy future Apple products. This smacks a little of desperation, and it's very unlike Apple."
In keeping with the slightly bohemian light-pop theme, Jobs announced an interesting new music partnership with Starbucks coffee shops.
Beginning next month, whenever an iPod Touch gets near a Starbucks with a Wi-Fi router, a dedicated Starbucks icon will light up.
Now I should note, this is actually great news for the non-fanboys among us; who kinda like the iPhone, but knew that $600 was an insane price to pay for what is really a midrange smart phone. Going down to $399 put the iPhone into the same price range as other phones in its class; though they are usually subsidized by the carriers down to $100 or $200 to induce new service contract signups.
Make no mistake though, this was always the plan; in fact Steve hinted at it even before the first iPhone hit the shelves; saying they were going to get very aggressive to put iPhones in peoples hands by Christmas. Well, this is certainly an aggressive move. They milked the cash out of basically everyone who was willing to part with $600 to get one; and then their sales went to zero. Now they are adjusting their price to try and get the rest of us interested. Bravo Apple for using the fundamental precepts of the market economy to the best of your abilities...
That sound you hear though? It's millions of apple fanboys begging for lube and a bottle of wine first.