SAN FRANCISCO -- Apple unexpectedly cut the price of its iPhone yesterday, claiming that it was seeking to broaden the market for the popular but pricey phone for the Christmas season.
The company also introduced a new digital music player modeled after its iPhone and struck a wireless music distribution deal with the Starbucks coffee chain.
Apple, which rarely drops prices on its products, cut the price of its 8-gigabyte iPhone by $200, to $399. Steve Jobs, chief executive of the Cupertino, Calif., electronics maker, said in an interview after the announcement that the company would have been able to hit its publicly declared target of a million iPhones sold in the United States by the end of this month, even without a price reduction.
"We're a high-volume manufacturer, and we're pretty good at getting costs down," Jobs said. "It's very clear we have a breakthrough product on our hands, but it's also clear that many can afford it, some can't. We'd like to make it affordable to even more folks going into this holiday season."
Investors appeared to interpret the announcement negatively. Apple's stock fell more than 5 percent, closing at $136.76, and most of the loss came during and after Jobs' presentation yesterday morning.
"My suspicion is that they got to 750,000 really quickly, and then it started to slow down," said Van Baker, an industry analyst at Gartner Group.
The iPhone was first sold June 29. A number of recent analyst reports have noted that the iPhone was selling well and was, indeed, outselling its smart-phone competitors. But Jobs said that if the company had waited past the Christmas buying season to reduce prices, it would have been forced to delay for another year a reach to a broader consumer market.
"We're feeling like being more aggressive," he said.
"They're trying to get the next demographic to bite into it," said Chetan Sharma, a telecommunications industry analyst in Issaquah, Wash.
Yesterday, Apple executives insisted that the price cut had been planned long ago.
They said that the strategy was conceived in part to keep the iPhone's pricing in line with its new iPod Touch, a music player that looks like the iPhone but lacks the phone-calling capability.
But the sharp price reduction suggested that even Apple, which has long lived in a pricing bubble insulated from other personal-computer makers, is not immune from the brutal pressures of the cellular phone business.
