Walmart knocked down the prices again – by more than 50% to $97 for an Apple iPhone 3Gs as of last Tuesday. So the gadget press churned out the obvious – Apple was allowing Walmart to clear out the iPhone 3Gs stock for the upcoming iPhone 4 likely to be announced at the Apple Worldwide Developers Conference on Monday June 7th, 2010. But one suspects with Apple that there is a lot more to this then clearing the aisles. Let us count the ways:
1)Apple wants to strike another stake into the heart of Windows Phone 7 and its Kin -even iPhone 3Gs has a feature set that Windows Phone 7 will be hard pressed to match in its promised Christmas intro since Redmond has already conceded that multi-tasking and cut/paste among other features will not be in the first Phone 7 OS.
2)Apple wants to steal some thunder from the launch of the highly touted Sprint/HTC EVO 4G. There is serious antipathy towards anything Android now that Google’s Android has slipped into second place to Blackberry’s RIM for smartphone market share.
3)Apple may be signaling more price competition with Dell and the flock of other smartphones and netbooks that are coming out this summer. Don’t be surprised to see some major price paring for the new iPhone 4 to keep the wolves at bay.
It is the third point that is of interest. Apple heretofore has been a very reluctant price competitor. When Microsoft offered its brutally awful Vista operating system as an easy target for Apple for nearly two years, Apple did not lower its prices but rather raised them. Then as Win PC vendors dramatically lowered their prices – the difference was Apple’s MacBooks were priced 3-5 times more expensive than the equivalent Win PC hardware. So all indications are no pricing competition with iPhone 4.
However this viewer is going contrarian and predicting that the entry level iPhone 4 will have a price of $425 to $475. But I have a suspicion Steve Jobs wants to keep his tech market capitalization crown intact vis a vis Google and Microsoft. So more aggressive pricing particularly around launches and other partners limited time events will become a part of the Apple playbook as well. However if I am right, the lowered margins could threaten Steve IT Value Crown:
The result is that with decline in price and margins Apple’s stock price scuttles below its current close according to my Trefis model. Go to Trefis and try your own assumptions. It is free and really helps to show what is at stake for Apple if they do adopt a low price amid the flood of new competitive devices coming to market this year. Equally fascinating is what Redmond will get its vendors and backers to charge if the Phone OS 7 is out in time for Christmas.