Friday, December 05, 2008

Rumor: $99 iPhone Likely

The rumors of a $99 iPhone may or may not be true and Wal-Mart will neither confirm nor deny those rumors, but the rumored price, capacity and distributor all are sensible.

If you think about it it really make sense after all Wal-Mart has already been selling G1s for $148.88 and Apple already has a 4GB iPhone that could be upgraded to support 3G. So why wouldn't Apple want to further boost its growing share of the smartphone market to the point of almost total domination.

Analysts for Kaufman Bros. and Needham & Company feel its just a matter of time. "While we are not sure of exact timing, we think a $99 Apple-branded cell phone is inevitable," analyst Shaw Wu of Kaufman Bros. wrote. "As we mentioned in our initiation report, we believe one of the key things Apple needs to do to drive broader iPhone adoption is to build a more complete product line like it has done with the iPod."

According to AppleInsider, Wu feels Apple could easily absorb a modest $100 margin hit to drop a model based on today's design down to $99. It could be even more likely that the company's carrier partners (AT&T) would be willing to eat that cost on their own through additional subsidies due to the handset's ability to drive higher ARPU (average revenue per user) with $30-$45 data plans in addition to pricey voice plans.

"The payback period [for the carriers] is two to three months making this an easy economic decision," Wu told his clients. "We would like to note that already in some international markets, customers can get an iPhone for free or less than $199 USD when they sign up for a longer-term contract (three years) and a premium feature package."

A $99 iPhone would likely be a strong seller. The current price tag is a bit much for many users especially given the worsening economic climate. I could probably even been swayed to buy one at that price!

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