Apple Inc halved the price of its entry-level iPhone to US$99 on Monday to widen the trendy device’s mass-market appeal, as global competition heats up after Palm Inc launched the Pre.
Apple also cut prices on several of its Mac notebooks amid a tooth-and-nail battle among computer makers for buyers during the recession.
And to shore up its hold on the smartphone market, it unveiled a new, faster, high-end iPhone that takes videos and has voice features, matching offerings by rivals Palm and Research in Motion’s BlackBerry.
PHOTO: BLOOMBERG
Analysts said sales could double for the cheapest iPhone.
Apple 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 US, Germany and elsewhere next Friday for US$199 to US$299.
“They plugged the hole in the offering of the 3G iPhone,” Gartner analyst Van Baker said, referring to the new features.
A rambunctious crowd livened up Apple’s annual Worldwide Developers’ Conference in downtown San Francisco on Monday, whooping and applauding as executives unveiled everything from a cheaper Mac Air notebook to a new operating system.
Shares in Apple closed 0.6 percent down at US$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 US$99,” could double existing sales. That is for the 8-gigabyte model previously priced at US$199.
Apple said it had sold more than 40 million iPhones and iPod Touches to date, up from the 37 million reported during a quarterly earnings call in April.
The new iPhone models and price cuts announced on Monday came days after Palm launched its Pre smartphone, which some analysts say is the iPhone’s closest rival.
Sprint Nextel Corp, which has exclusive US rights to carry the Pre, said it had record sales of the smartphone in its first weekend, and was restocking the phones “as quickly as Palm could make them.”
The US$99 iPhone will cost half as much as the US$199 Pre. By slashing the price of the 8-gigabyte iPhone and rolling models out this month, Apple’s strategy appeared designed to take advantage of the Pre’s limited availability, CL King & Associates’ Lawrence Harris said.
In a note to investors on Monday, he estimated that Palm produced just 50,000 Pre phones last month.
AT&T, the exclusive US service provider for the iPhone, will sell the 16-gigabyte 3G for US$149, down from US$299, while supplies last.
Competition is intensifying among cellphone makers from Nokia to HTC Corp for a slice of one of the few remaining fast-growth tech markets.
Globally, research house Ovum expects smartphone shipments to reach 171.9 million this year, rising 23 percent from last year to account for about 15 percent of the worldwide mobile phone market this year.
But the battle in that lucrative arena is eroding margins.
Apple executives did not comment on impact to profitability from the cheaper iPhone or Mac Air — which at US$1,499 is still costlier than computers from the likes of Dell Inc or Hewlett-Packard Co.
AT&T said the halving in price would not affect its profit targets and that it was sticking to its objective for wireless margins in the low 40 percent range.
Much of Monday’s event was taken up with new features for Apple’s best-selling gadget. Executives announced that new iPhones will support TomTom satellite navigation devices and support multiplayer games such as Asphalt 5.
The consumer electronics giant showed off a new 15-inch notebook with improved battery life, a US$300-cheaper Mac Air — its thinnest laptop — and, as expected, its highly previewed “Snow Leopard” Mac operating system software.
The company also unveiled a new 13-inch MacBook Pro starting at US$1,199, and a 15-inch laptop with longer battery life, addressing a perennial consumer concern.
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