Analyst: Apple to Offer iPhone 3GS for Free

| Apple Stock Watch

iPhone 3GS
Apple is planning to lower the retail price of a subsidized iPhone 3GS to US$0.00 in September, according to RBC Capital analyst Mike Abramsky. The analyst said that when Apple unveils the next generation of its iPhone line in September, that it will cut the price of the iPhone 4 to $99, and keep the now-two year old 3GS on the market as a free, entry-level device.

“As its entry-level iPhone strategy, Apple is expected to cut iPhone 3GS to $0 (on contract, $399 unsubsidized) in conjunction with iPhone 5 launch,” the analyst wrote in a research note obtained by Forbes. “This approach is intended to target mid-market smartphone buyers and counter Android’s mid-market expansion.”

Mr. Abramsky cited a proprietary survey conducted by his firm that found Apple could double its market share with this strategy.

Apple currently offers the iPhone 3GS at $49 with a subsidized two-year contract. If the company followed the same path when it refreshes the iPhone in September, the 3GS would go away while the iPhone 4 was offered at a reduced rate, alongside the new device that would be offered at the same price the iPhone 4 is offered today ($199 and $299).

The new strategy described by the analyst would simply extend what Apple has done in the past by leveraging a device whose R&D costs have long been paid and go after entry-level smartphone customers.

The analyst maintained hus $450 price target on Apple’s stock and his “Buy” rating.

Shares of AAPL briefly traded higher during the mid-morning session, but quickly gave back those gains. In the eary-afternoon session, the stock was trading at US$334.32, down $0.94 (-0.28%), on moderate volume.

*In the interest of full disclosure, the author holds a tiny share in AAPL stock that was not an influence in the creation of this article.  

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Comments

Bosco (Brad Hutchings)

Good grief. Bryan, if you wanted a TMO feature that would be as big in this decade as Apple Death Knell was in the last decade, start a TMO analyst score card. Enter the predictions with the names, and keep a status (Correct, Incorrect, Open), and an expected resolution date.

Bonus points for creating a subsidiary, hosting it in the Bahamas, and letting people with non-US bank accounts place wagers. grin.

BurmaYank

“... start a TMO analyst score card. Enter the predictions with the names, and keep a status (Correct, Incorrect, Open), and an expected resolution date.”

I think that’s a great idea! smile

Will

Is Apple getting serious about its high scale pricing? First the iPad comes in with a fair mark structure that charms the Apple coffers, pleases the consumer and confounds the competition. The entry-level MBA sports a favourable price. The iPhone is purported to offer enticing price structures.

Will Apple’s other computer siblings stand tall with hefty price cuts to further assail the competition?

In the days of penny pinching, computer’s reign in wane and Windows 7 looking so promising, a treasonous thought has crossed my mind as I spy my venerable iMac.

BurmaYank

BTW, do I recall correctly that rattyuk said he was keep[ing a Bosco predictions list?  If so, that could also make an interesting & useful predictions score card, I think.

Lee Dronick

In my opinion this would be a big mistake. Once you go that cheap you can’t go back. I don’t think that it will happen, if so then put it on my score card; There has been occasions when I have been wrong about scoring, but Babe Ruth was also the strikeout king.

Bosco (Brad Hutchings)

No, that was RonMacGuy, who is applying his amazing skills managing a $40M engineering budget to tracking an unpaid commenter (me) on this website. The funny thing is that I don’t hide behind a screen name when I comment on serious issues, and I’m neither intimidated nor flattered by wanna-be stalkers. BTW, Rattyuk is the guy who is trying to perfect passive aggressiveness as an investment strategy.

In my suggestion above, I’m not talking about message board conversations. I’m talking about paid analysts who make money issuing reports predicting specific things that never happen in order to pump a stock for their clients. You guys will be absolutely burned by these pretenders one day if you aren’t lucky enough to stop following their advice at the right time.

vasic

Current iPhone (4) costs $650. Currently, iPhone 3GS costs $500 (although you can’t buy it without a contract, so you can do $50 through AT&T, with a two-year contract and subsidy).

It would make sense, when iPhone 5 (or whatever it will be called) comes out, the 4G comes down to $550 ($100 with contract), and 3GS comes down to $450 (no money down, just the subsidy pay-off).

This is, of course, still much more than the cheapest Android (some $180 for a CDMA LG on MetroPCS, no contract, no subsidy).

Bryan Chaffin

That is a terrific idea, Brad. I especially like the bit about wagering. smile

RonMacGuy

It’s a $60M engineering budget, Bosco.

Hey everyone, we’re supposed to respect Bosco because he uses his real name!!  So very impressive!!  I guess I just didn’t realize.

grin

Lee Dronick

Maybe until inventory runs out, and promote it that way. One on hand I am thinking that it would cheapen the image, but on the other hand it puts a halo around Macs and other Apple products.

Lancashire-Witch

Check out these iPhone plans from Vodafone New Zealand.

Choose the right plan and you get a free 16 GB iPhone 4

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