Apple halves iPhone to $99 to galvanize sales

Mon Jun 8, 2009 6:39pm EDT
By Alexei Oreskovic and David Lawsky
SAN FRANCISCO (Reuters) - Apple Inc halved the price of its entry-level iPhone to $99 on Monday in a move that could widen the trendy device's mass-market appeal as competition for smartphones heats up.
The company also unveiled a new iPhone that takes videos and has voice features, matching offerings by rivals Palm and Research in Motion's BlackBerry.
Analysts said sales could double for the lower-priced iPhone.
Chief Executive Steve Jobs, on medical leave since January, did not put in a much speculated-about appearance.
The next-generation iPhone 3GS -- the "S" stands for speed, double that of the original model -- goes on sale in the United States, Germany and other countries on June 19 for $199 to $299.
"They plugged the hole in the offering of the 3G iPhone," Gartner analyst Van Baker said, referring to the new features.
A lively crowd convened at the event in downtown San Francisco, whooping and applauding throughout the conference as Apple executives unveiled everything from a much-cheaper Mac Air notebook to fresh operating system software.
Shares in Apple closed 0.6 percent down at $143.85 -- after a 6.5 percent climb in the week leading up to the highly anticipated event -- as Jobs failed to show and investors debated the merits of the sharp iPhone price cut.
Morgan Stanley estimates that an entry-level iPhone at what Apple marketing chief Phil Schiller calls a "breakthrough price of $99" could double existing sales. That is the 8-gigabyte model previously priced at $199.
AT&T, the exclusive U.S. service provider for the iPhone, will sell the 16-gigabyte 3G for $149, down from $299, while supplies last.
Apple's announcement came days after Palm launched its "Pre" smartphone, which some analysts say is the iPhone's closest competitor for the consumer market.
"Apple's strategy appears to be designed to take advantage of the current limited availability of the Palm Pre," CL King & Associates analyst Lawrence Harris wrote. "It is clear that Apple intends to maintain its leadership position in the smartphone market, given its decision to cut prices."