Just when you thought things couldn't get interesting enough, someone goes and says something crazy.
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 wrote today in a research note by way of Electronista.
According to Wolf, the average, unsubsidized price of an iPhone 3G in the summer was $666 and would therefore give Apple a nearly 50 percent gross margin on each unit (as well as a heavy subsidy from AT&T of $450). That's a lot of wiggle room -- so much, in fact, that the big Apple could drop the price of an 8GB iPhone to -- take a deep breath now -- $99 while still managing a comfortable 42.3 percent margin.
Hosanna, hosanna in the highest! the angels sung.
Electronista also notes that 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 cutsBut the bottom line is this: A price drop to such degree is a potentially devastating swipe at competitors in the market. Wolf writes that lopping off $100 of the iPhone 3G's advertised price could "double or triple" projected sales and quickly overtake most other smartphones on the market, leaving only successful "niche" smartphone manufacturers like Research in Motion, which produces the BlackBerry.
When an in-demand phone's price drops, its spot on the sales charts usually rises, especially in the U.S., where subsidies are often not as steep as those in Europe. Case in point: Despite a strong launch, the iPhone 3G was outsold by Motorola RAZRs in the summer thanks to free or near-free pricing with many carriers. Even RIM is in on the action: 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, Electronista notes.
So that brings me to a simple question: Could a $99 iPhone rule the world? (Or, for Android fans, could a $148.88 T-Mobile G1 rule the world?)
Tell us why in TalkBack.