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. 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. 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.
The company's dramatic growth in non-GAAP revenue could also give Apple a significant amount of breathing space to play with the iPhone's price by cushioning more substantial price cuts.
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.
Price drops have regularly contributed to phones leading the sales charts, particularly in the US where subsidies aren't often as steep as in Europe. Although it had a strong launch, the iPhone 3G was outsold by RAZRs in the summer due to the Motorola's phone free or near-free pricing with many carriers. BlackBerries have also taken two out of the top five positions in NPD phone sales figures for the summer as the Curve and Pearl began selling for $100 or less on certain contracts.
In contrast, many Palm OS and Windows Mobile smartphones often sell for more than $100 when subsidized, while Nokia rarely offers its smartphones tied to carriers in the US and currently prefers to sell most of them as unlocked models at higher prices.
Source: electronista
