Analyst: iPhone Hits Competitive Price Point

At US$499 and $599, the iPhone might seem like an expensive option for a cell phone, but when comparing the cost over the required two-year service plan, Appleis combination iPod and smartphone can cost less than similar products. Piper Jaffray analyst Gene Munster sees the aggressive iPhone service plan prices as a plus to help draw more customers into the AT&T fold.

"The service plans are about 25 percent cheaper than we had been expecting," he said. "Which is a positive, as it removes one of the barriers to entering the market."

Mr. Munster compared the overall two-year cost of owning a 4GB iPhone for a new customer to the cost of purchasing other smartphone offerings from AT&T, the exclusive carrier of the iPhone. Adding together the $499 phone price, plus the $36 activation fee and mid-range $79.99 monthly service fee, the iPhone costs $2,419 over two years. In comparison, the BlackBerry Pearl comes in at $2,429, and the BlackBerry Curve will cost $2,479.

Whether or not Apple will have enough units on hand for the June 29 launch, dubbed iDay, remains to be seen. Mr. Munster estimates that Appleis largest retail locations could have as many as 10,000 iPhones on hand, and that there may be at least 1 million units available in the retail channel. He expects that Apple and AT&T could sell upwards of 200,000 units in the first two days of availability, but added "Adequate supply could provide upside to our June quarter numbers of 200,000 units."

Mr. Munster is maintaining his "Outperform" rating and $160 target price for Appleis stock. Apple is currently trading in the pre-market at $120.53, up 0.88 (0.74%).

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