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Monday, 08 December 2008 05:53

$99 iPhone is inevitable, says analyst

A market analyst's report has sparked renewed speculation that there will soon be a $US99 iPhone. There are a number of reasons why the speculation may well solidify into something concrete.

There have been recent rumours that Wal-Mart will begin selling a version of the iPhone 3G with 4G of storage for $US99 at the end of this month.

Now analyst firm Kaufman Bros has expressed the opinion that a $US99 iPhone is inevitable - but without predicting when that's likely to happen.

The reasoning is that part of the iPod's success was due to Apple offering models at various price points.

That said, Kaufman Bros is tipping that there will be more to distinguish the hypothesised $99 iPhone from its more expensive siblings than just a reduced amount of storage.

The report also suggests that carriers could afford to increase their handset subsidies thanks to the data revenue associated with the iPhone. iPhone users account for a disproportionate share of mobile web use.

And there are precedents for lower iPhone prices. One example can be found in Australia, where Optus offers a 16G iPhone 3G for $0 upfront on a 24-month $A79 contract.

What might Apple and its partners be thinking? Please read on.

Let's face it, the price you pay for a mobile phone with a contract is only marginally related to the actual cost. Carriers are more concerned with the total profit they'll make over the life of the contract.

Furthermore, the number of commuters I see on the train using both an iPod and a non-Apple mobile phone (recent models in both cases) is anything to go by, suggests an unmet demand for a cheaper iPhone.

And it's not completely unthinkable that Apple could sacrifice margin for volume.

The question is this: is an iPhone more like an iPod or a handheld computer?

Apple has found it very profitable to stay out of the low end when it comes to computers, preferring to see higher-end models at higher than average prices.

Yet while it has stayed out of the absolute bargain basement in the music player world, it does offer iPods at a fairly wide range of prices, including the iPod shuffle which has become almost a stocking filler for some families.

The way the economy is going, Apple may well find that bringing a $US99 iPhone to market is essential.

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Stephen Withers

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Stephen Withers is one of Australia¹s most experienced IT journalists, having begun his career in the days of 8-bit 'microcomputers'. He covers the gamut from gadgets to enterprise systems. In previous lives he has been an academic, a systems programmer, an IT support manager, and an online services manager. Stephen holds an honours degree in Management Sciences and a PhD in Industrial and Business Studies.

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