Analyst: Apple to Offer iPhone 3GS for Free

“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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