Analyst: $99 Wal-Mart iPhone Not Likely

Buying an iPhone 3G seems a little more likely now that Bloomberg and the San Jose Mercury News are backing up the rumors, but the likelihood that Apple will sell a US$99 model through the retailer seems slim, and could even cannibalize other iPhone and iPod touch sales, according to UBS analyst Maynard Um.

"We believe a $99 iPhone would be atypical of Apple's premium brand strategy ($149 seems more logical if a 4GB model were introduced)," Mr. Um said. "More likely is a scenario in which select Wal-Mart (and possibly Sam's Clubs) are simply added as further iPhone distribution points (like the Best Buy announcement)."

He added that while a $99 price point for a 4GB iPhone could stimulate incremental demand, it would come at a cost to 8GB and 16GB iPhone sales as well as iPod touch sales.

Rumors began circulating recently that Wal-Mart would start selling a new 4GB version of the popular iPhone 3G on December 28. Several California-based Wal-Mart stores, however, have indicated that they expect to stock the 8GB and 16GB models.

Mr. Um is maintaining his "Neutral" rating and $115 target price for Apple's stock. The company is currently trading at $99.34, up 5.34 (5.68%).