Andrew Hill Pricing the Apple iPad Mini? Ask Steve

Apple's iPad Mini

Who wouldn’t have wanted to be a fly on the wall when Apple’s senior executives were discussing pricing of the new iPad Mini? At $329 (£269 in the UK), the relatively high price now appears to be making investors nervous.

What would Steve Jobs have done? Overpricing of the original Macintosh computer – conceived as a $1,000 machine, which increased to $1,995 because of Jobs’ tinkering with the design – was one of the first big disagreements between Jobs and John Sculley, then Apple’s chief executive.

As Walter Isaacson writes in his biography of the late Apple founder, Mr Sculley’s decision in 1983 to add a further $500 to the price and charge $2,495, to help pay for the huge launch and marketing push, made Jobs furious: “It will destroy everything we stand for,” he said. “I want to make this a revolution, not an effort to squeeze out profits.”

Isaacson goes on:

Even 25 years later, Jobs seethed when recalling the decision: “It’s the main reason the Macintosh sales slowed and Microsoft got to dominate the market.” The decision made him feel that he was losing control of his product and company, and this was as dangerous as making a tiger feel cornered.

That said, when the first iPhone priced at $500, Steve Ballmer of Microsoft pooh-poohed it, telling CNBC that it was “the most expensive phone in the world”, only to be confounded when millions bought it.

The difference is that both the Macintosh and the iPhone were disruptive, breakthrough products, rather than derivatives of one. As my colleague Richard Waters pointed out (ahead of the launch):

A smaller iPad… is best seen as the company shoring up the defences of the most powerful ecosystem the consumer technology world has seen. The iPhone, which turned the handset world upside down, and the 10in iPad, which is starting to eat into the PC industry, were game-changers. But a 7in iPad will be disruptive of precisely nothing.