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

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

Summary: Re-use of this image permitted under the GFDL$99 iPhone. Keep smoking that crystal cider, Apple freaks!

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Re-use of this image permitted under the GFDL

$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 $99, 4GB iPhone 3Gs in early Q1 of 2009. Even assuming if this rumor is true, I think it's a mammothly stupid idea. Which is why I call bull@#$%.

Click on the "Read the rest of this entry" link below for more.

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.

Topics: Hardware, Apple, iPhone, Mobility, Processors, AT&T

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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Talkback

20 comments
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  • You have a point, but...

    It's massively unprofessional to go in print accusing people, even in jest, of doing drugs.
    Spiritusindomit@...
    • I said Apple Cider and Egg Nog.

      <NT>
      jperlow
      • I gaurantee you that the speculation alone will cause stocks to rise...

        Even the mere speculation is good for Apple because they get more free advertising. Look at how many blog posts on ZDNet alone mention the iPhone. The entire IT blogosphere is doing Steve Job's bidding and they don't even know it.

        The man is clever... :\
        T1Oracle
      • Doesn't matter what you siad J, in all honesty

        The graphical image of a person smoking crack is more than enough to make one wonder about a great many things.
        Intellihence
        • RE: "Doesn't matter what you siad J, ... LOL!

          <font color=grey><em>The graphical image of a person <strong>smoking crack</strong> is more than enough..."</em></font><br>
          <br>
          Yo J, that flunked the taste test. Did you take this <a href="http://blogs.zdnet.com/perlow/images/smoking_crack-sm.jpg" target="_blank">pix</a>? :D<br>
          <br>
          <font color=grey><em>"...make one wonder about a great many things."</em></font><br>
          <br>
          ^o^<br>
          <br>
          n0neXn0ne
    • Message has been deleted.

      .
      n0neXn0ne
  • The secret to the "cheap" iPhone is the outrageous TCO

    Fortunately for Apple sheep don't see TCO. Unfortunately for the American public and the economy, we are so inundated with advertising that we all act like sheep from time to time. :\
    T1Oracle
  • All Apple fans freebase

    Come on you should know all the Apple fans are high on
    Steve Jobs and company. They will believe anything.
    I suppose WalMart will be selling the MacBook for $500 too.
    I would have to ask those who spread these kinds of rumors
    how much do they know about Apple and its marketing?
    Its obvious that it's not much. Apple is all about keeping
    profit margins in tacked. Did we not just get over the great
    Black Friday rumor of Apple slashing prices? Yea Right!!
    jscott418-22447200638980614791982928182376
  • RE: $99 WAL-MART iPhone? What are they smoking?

    "$99 iPhone. Keep smoking that crystal cider, Apple freaks!" Loved the tagline!

    I also agree with your point. I don't think selling the iPhone for $99 makes sense based on Apple's price setting track record.

    -Amit Chowdhry (pulse2.com)
    achowdhry
    • There is only ONE possible element of truth in this

      What if... and this is a big if...

      Apple and AT&T Wireless had hundreds of thousands or even MILLIONS of 1st generation iPhone 4GBs in surplus? What if they needed to dump them?

      Of course, if this were true... T and AAPL would tank.
      jperlow
  • Jason, you get a thumbs up from me for this one

    I couldn't possibly care less about whether or not the $99 iPhone rumor is true but you get a thumbs up for the picture and the entertaining article. It made me smile. :)
    NonZealot
  • RE: $99 WAL-MART iPhone? What are they smoking?

    I would buy one if you didn't have to sign a contract. It would be cheaper than a touch and that's what I'd use it for!
    compy386
  • Cross dressing pot smokers?

    You can't even shop at Wal-Mart any more.They block the isles.
    anonymous
  • Is there a super-cheap iPhone killer lurking somewhere?

    That is the only scenario that makes sense to me. What if some Chinese outfit is pitching a smoking unit that does everything the iPhone does for a quarter of the price? How would/could Apple respond?
    terry flores
    • Message has been deleted.

      .
      n0neXn0ne
  • Explanation: Wal-Mart Absorbs Cost

    Wal-Mart has always sold loss-leader items to get people into the store. This time, it might be just to improve their image and make them look more tech-savvy than they are known for.

    Yeah, if sales are heavy, they are up for big losses at $100 each. But with their rebranding, they might be ready to sink a bunch of money into looking the part.
    cgarrett
    • Makes sense

      Seems like good business sense to me. Assuming
      contract prices are same or similar, Wal-Mart at $99
      would target middle to lower income families eating
      some of the upfront costs to Apple but in the long run
      would make that back in contract income from AT&T. And
      it would be fine and dandy for Apple because they're
      mostly interested in marketshare. With majority
      marketshare of music players and mobile phones and the
      requirement to use those devices with iTunes and
      register a credit card, they have a first stab at
      people that previously would not purchase online
      digital content and is where they make a big chunk of
      their money. And with economy of scale, it probably
      costs Apple a lot less to produce them now then they
      did 6 months ago.
      dean@...
  • Another way to kill economy

    Yep, walmart always finds the right way to kill the economy and the small business.

    Will it be true? With all the problems at the moment in corporation I would not be surprised at all the they go down to that level not to sink! (Pun intended!)

    AT&T allowing such a deal to happen will only prove that they don't have good administrators and managers like 80% of the American continents companies. A bunch of "wanna-be" administrators with delusion of knowledge, and the worst part is that the owner of the companies still believe in these ludicrous beings.

    We'll see what AT&T decides.
    GuardianBob
  • RE: $99 WAL-MART iPhone? What are they smoking?

    Makes perfect sense to me, the consumer.. I'm happy with my Blackberry but always find myself toying with my wife's iphone whenever she leaves it laying around. I never wanted to commit to one until I heard there was going to be a 99.00 offering.. For 99 bones, it would make a great spare phone.
    I'm sure there are a lot of BB owners like myself.. Storm sucks btw

    Doug C.
    Ovakyll
  • RE: $99 WAL-MART iPhone? What are they smoking?

    Yea right. Sure called that 'dead point center' ;^)
    Try talking with someone that actually KNOWS something
    about business plans, before spouting off here,
    Sparky. Nice one!
    odoncaoa@...