“Apple has the room to cut the price of the iPhone to where it could take command of the smartphone market, analyst Charlie Wolf of Needham Research says today in a research note,” MacNN reports.
“The financial expert estimates that the average, unsubsidized price of an iPhone 3G in the summer was $666 and so would give Apple a nearly 50 percent gross margin on each sale as well as a heavy subsidy from AT&T of $450,” MacNN reports.
MacDailyNews Note: The Apple I, designed and hand-built by Steve Wozniak, was Apple’s first product. It went on sale in July 1976 for $666.66.
MacNN continues, “Both give Apple a large amount of space to adjust its price and could see the phone maker drop the price of an 8GB iPhone to $99 while still supplying a comfortable 42.3 percent margin.”
MacNN reports, “Any such price drops would be potentially devastating to competitors in the market, according to Wolf. The analyst believes that a $100 cut in the iPhone 3G’s advertised price could ‘double or triple’ projected sales and quickly overtake most other smartphones on the market and leave only successful but ‘niche’ smartphone manufacturers like Research in Motion, which produces the BlackBerry.”
Full article here.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
Another example of why most anal-ysts are ‘arm-chair quarterbacks’ and not CEO’s of leading NASDAQ companies.
Nice try Charlie, now, go back to sleep.
generally the macdailynews crowd is spot on, but unfortunately this time I think you all sound like a bunch of uneducated illiterate readers. All the analyst is saying is that it would be more then financially feasible for Apple to lower the current iPhone an additional 100$ with out much impact on the margin of the phone. This would not impact the quality of the phone or manufacturing what so ever.
Also, by seeing a 100 or 200 percent increase in sales while only a 7 percent dip in margin, Apple will be making a lot more money, not to mention the overall mentality that people will approach Apple with will have a more positive light and encourage other purchases.
For right now I think Apple is doing great, but expect them sometime in the coming months (read: January, after the Christmas crowed has been milked for all they are worth.) to introduce the current iPhone at the 99$ level.
I would stap up a handfull at $99.00… lt’s see one for the kid, one for each of two sisters, one for the folks and one for me!
That’s 5 x $99.00 = $495.00
NOT A BAD DEAL!
“… (Apple) could drop the price of an 8GB iPhone to $99 while still supplying a comfortable 42.3 percent margin.”
Is MacNN really saying that it only costs Apple about $55 to manufacture an iPhone? Yeah, riiight.
“The analyst believes that a $100 cut in the iPhone 3G’s advertised price could ‘double or triple’ projected sales and quickly overtake most other smartphones on the market and leave only successful but ‘niche’ smartphone manufacturers like Research in Motion, which produces the BlackBerry.”
And if pigs had wings, guess what?
They still couldn’t fly. Flying takes more than just having wings.
@ Mephistopheles
You are that nutcase.
Let’s see:
ATT network is groaning under the current load. (not good)
Factory production of iPhones is maxed out. (very good)
Apple making lots of money at current price.(very good)
What would be smart about lowering the price?
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Just because some doofus only wants to pay $100?
Doofus support is gonna cost you extra!
Please move along…
First, we don’t want Apple’s iPhone to crash and burn like the RAZR of the cellphone world. Plus, if too many iPhones make it to market, the network will be crushed. Let’s grow the iPhone market, only as quickly as the network can accomodate them.
Second, the AT&T;subsidy is NOT $450. You have to calculate the Average Selling Price at retail. Some will buy $200 8gig iPhones and some will buy $300 16gig iPhones, like I did. Others don’t qualify for the discounted price and will have to pay $400 and $500, like my brother. When you add it all up, the ASP is going to be probably around $300.
If the revenue to Apple is $660, then the subsidy is about $360.
If you drop the iPhone’s entry price to $100, then adding in the subsidy of $360 gets you to $460. Since, Apple’s current cost is about $315, 47.8%GM x $660, you have a gross profit of about $145, or 31.5% GM.
That’s doable, but if Apple were to release a $99 iPhone, it’d be smarter to offer the old EDGE one as your $99 iPhone. It’s not only cheaper to make, and cheaper for the consumer, but EDGE has better coverage and the data plan is cheaper. Drop the $5 SMS fee, and your data is only $15. With the $40 voice, you have a monthly bill of $55, in line with T-Mo’s cheapest plan for the G1.
@pzparker
Before you accuse me of be a” bunch of uneducated illiterate reader” you should learn the difference between “then” and than. Idiot!
I have T-Mobile and a iPod touch. They team up well together with no high fees from a company that that I used to have 30% dropped calls on.
just wait until i become president and raise the corporate taxes! when it happens, you can bet your bottom dollar that apple will have to raise the prices of your precious little iPhones to keep the profits the same!!! bwahhhhahahahaha!!
You have to wonder from where these “analysts” get their ideas. Normally you cut prices when the growth rate begins to level off to further drive demand. For example, MS cut the XBox 360’s price at the point where the PS3 began outselling the XBox. Apple did the same with the iPod shuffle, when iPod sales began to flatten.
On the other hand, the iPhone is still on a curve of growth. Even if you figure that the Q4 results include a substantial pent up demand from the previous quarter, the sales are still at least as good as the first two quarters (Oct 2007-Mar 2008).
As for the price verses cost, I completely fail to understand why the analysts cannot figure out that when ATT sells a handset, it pays the manufacturer a wholesale price and sells it for a retail price. If $666 is a retail price, the whole sale price is likely to be as low as $350.
Apple reports a margin of 48 percent for the iPhone and Apple TV combined. If the cost of the iPhone is really $182 (as has been reported), the $350 wholesale price seems to be reasonable. It would make the ATT subsidy $150 per unit sold by ATT (as ATT receives $200 from the customer).