$99 WAL-MART iPhone? What are they smoking?

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$99 iPhone. Keep smoking that crystal cider, Apple freaks!

There's been a lot of speculation about whether or not if WAL-MART is going to be selling $99, 4GB iPhone 3Gs in early Q1 of 2009. Even assuming if this rumor is true, I think it's a mammothly stupid idea. Which is why I call bull@#$%.

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Let's start with the fact that it probably COSTS at least that much if not more to manufacture an iPhone. To sell the 8GB iPhone at $199.00, AT&T has to take HUGE losses on the device with a carrier subsidy for each purchase, and make it up in service charges. Assuming that the difference in parts cost to have 4GB of flash memory versus 8GB of flash memory on an iPhone is like, what, 20 dollars at most, the entire economic model makes no sense. Not only that, but it totally contradicts the "I don't do cheap" philosophy (cough! religion) of Steve Jobs and company.

Given the fact that for at least the next four years, AT&T Wireless has a virtual carrier monopoly in the United States on the iPhone, it would be catastrophically stupid to offer an iPhone at WAL-MART  for $99. First, assuming that this iPhone is not offered through a different carrier -- which AT&T would never agree to because it would violate their contract -- they would be AT&T kiosks in WAL-MART stores, which if they sold the device at the rumored price, would completely cannibalize most iPhone sales online and in AT&T Wireless stores. It would also make every AT&T reseller livid with rage, who already don't have the right to sell iPhones, as it's an AT&T store exclusive.

Who in their right mind would pay $199 for an 8GB iPhone or $299 for a 16GB model when they can get the 4GB for $99?

If your response is "Well DUH, Apple fanatics, that's who" then you're all freebasing too much egg nog.

There is only one scenario in which $99 iPhones would exist -- and that is one which any investor in Apple and AT&T  should be extremely afraid of -- that hundreds of thousands or even millions of 1st-Generation 4GB iPhones (the original EDGE-based devices) exist in surplus, and this is an attempt to defray a huge capital loss. If this were the case, I shudder to think about what would happen to AAPL and T. The economy has been hammering them enough as it is.

Is WAL-MART going to be selling iPhones at AT&T kiosks? Possibly. Will they be $99? I seriously doubt it.  Talk Back and Let Me Know. Cause I know you will.