In what might be the death blow for any chances the Pre might have had for success, Apple today announced that the current 8GB iPhone 3G will now sell for $99.
Since the iPhone first launched, analysts have said that if Apple truly wants to own the smartphone market in the same way it owned the MP3 player market, it had to make the iPhone more affordable. And now that Apple is poised to release a new iPhone model, called the iPhone 3GS, in capacities of 16 and 32GB, it opens up the door for Apple to sell the newly crowned “old model” 8GB iPhone 3G for only $99.
This surely can’t be good news for Palm, which just released the highly praised Palm Pre this weekend. Some consider the Pre to be in the iPhone’s league, but with an 8GB Pre selling for $199 (after a $100 rebate), Apple’s 8GB iPhone automatically becomes a more attractive and affordable device, especially when you consider the forthcoming iPhone OS 3.0 update.
Remember that the iPod didn’t attain significant market share until Apple released a cheaper model in the form of the iPod Mini. Once Apple started consolidating the MP3-player market at the high and low end, competitors were left scrambling, and were ultimately unable to compete with Apple’s line of iPods. With a $99 iPhone now on the market, we might see history repeat itself. Historically, Gene Munster of Piper Jaffray notes that the last time Apple cut the price of the iPhone in half (from $399 to $199), domestic sales doubled.
And finally, while Microsoft’s latest ads lambast Apple for their high prices, Apple was all about the price cut today. First, it significantly lowered the prices on a number of its laptops, then it announced that Snow Leopard will only cost $29, and finally, it lowered the price of the current iPhone 3G down to $99. All in all, a good day for Apple fans.