How the iPhone could rule if Apple dropped price to $99
Could the iPhone sell in even better numbers if Apple was brave enough to lower the price? Could Apple afford to drop the price in the first place? The answer to both questions is yes, at least according to analyst Charlie Wolf, who thinks the iPhone would do exceptionally well if it cost $99.
It’s time to come out, at last, after months of people urging me to. I’m not an iPhone owner. There, I said it. My secret is out. The only reason I’m not an iPhone owner is the price of the damn thing, not only to buy in the first place but also the price of a decent monthly contract.
I’m not even a fan of Apple, but the iPhone is the one product which has appealed to me enough to make me crave owning one. If only it were cheaper! If Steve Jobs were to listen to financial analyst Charlie Wolf, my wish could soon come true.
Electronista reports that Charlie Wolf of Needham Research recently published a research note where he estimates that the unsubsidized price of an iPhone 3G sold this year was $666. If accurate, this would give Apple almost a 50% gross profit margin, on top of the AT&T subsidy of $450.
These two figures combined give Apple a huge amount of breathing space for adjusting its price. Wolf then calls for the 8GB model to be reduced in price to just $99. That would still give Apple a 42% profit margin. More than enough to keep Jobs in the lifestyle he’s accustomed to.
Would it be worth Apple while to pull off such a move? Wolf thinks yes, as such price cutting would surely increase sales by a huge margin. In fact, Wolf surmises that iPhone sales could increase by two or three-fold.
The evidence for this extrapolation is that price cuts are known to have increased sales of other smartphones. Motorola’s RAZR V3 outsold the iPhone in the U.S. over the summer due to being available for $100 or less on some contracts.
Wolf’s figures could be out but even if they are, I certainly think Apple should consider cutting the price to bring the iPhone in to the price range of a whole new demographic. With the credit crunch starting to inhibit consumer spending, it could be exactly what’s needed to keep interest in the iPhone ticking along at a high level.
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October 28th, 2008
no way they could ever go down to 99, at&t gets some of that cash and they would get killed…read my blog at http://www.myiphoneplace.com
October 30th, 2008
Why would they cut the price and lower margins while it’s selling as well as it is? How are they better off needing to sell 3 phone to make the same profit, leaving out the AT&T swag? Or now have to support 3 for the same profit as one?
Jobs has programmed his customers to twitch whenever the Apple Store goes off line. They talked about how it was good the first iPhone didn’t have 3G because of battery drain instead of bitching about the no swap battery.
Jobs is a genius.