With talk of Apple seeking to release a cheaper iPhone being revived in recent days, RBC Capital Markets analyst Mike Abramsky now weighs in to report that he believes that Apple will be keeping the iPhone 3GS around even after the next iPhone hardware update, offering the device for free with a two-year contract and at $399 for unsubsidized purchases. Apple currently sells an 8 GB iPhone 3GS for $49 on a two-year contract and $449 unsubsidized.

As its entry-level iPhone strategy, Apple is expected to cut iPhone 3GS to $0 (on contract, $399 unsubsidized) in conjunction with iPhone 5 launch (we continue to expect it in September). This approach is intended to target mid-market smartphone buyers and counter Android's mid-market expansion. We expect iPhone 5 to launch at $199/$299 ($599/$699 unsubsidized), and Apple to drop iPhone 4 pricing to $99 ($499 unsubsidized).

The claimed $399 price point for the unsubsidized iPhone 3GS is a bit higher than other reports have been hinting at, with the analyst report from earlier this week suggesting that Apple would try to come in at $349 for its cheaper iPhone.

iphone 3gs oblique
Earlier reports had claimed that Apple was working on a smaller iPhone form factor that could allow the company to offer the device for as little as $200 unsubsidized. But while some rumblings of a new, smaller iPhone option for this year continue to float around, Abramsky believes that the "baby iPhone" will not be released until 2012, in part to fully take advantage of iCloud leverage that may not be possible as the service debuts.

Related Forum: iPhone

Top Rated Comments

wordoflife Avatar
147 months ago
Source? Link?
In Europe, mainly countries like the UK (and even Canada ... yes I am aware that is not in Europe) get the iPhone 4 for dirt cheap or even free provided you sign a contract. Carriers in the US are very greedy.

Back to the article ... why would they keep the 3GS? It's going to be 2 generations behind...
Score: 6 Votes (Like | Disagree)
MonkeySee.... Avatar
147 months ago
Really? Is anyone going to get a phone that is soon to be 3 generations old?

My 3GS is getting tired and i'm sure iOS 5 isn't going to help. I can't wait to palm it off on the sister-in-law.
Score: 5 Votes (Like | Disagree)
bushido Avatar
147 months ago
lol america

i can already get the iPhone 4 for free with a 2 year contract
Score: 4 Votes (Like | Disagree)
Cloudsurfer Avatar
147 months ago
If we're living in the past, then you must see no value in the internet, or Macrumors for that matter. Very little innovation comes out of Europe anymore. If you don't see that, you're just ignorant. Apple, Intel, AMD, Microsoft (when the copier isn't running), and Google (them too) are the main sources of innovation, at least in the tech world, and they're all American-based. Europe needs to get its act together. You guys lost John Ive all those many years ago, and for good reason.

Europe has BMW, Mercedes-Benz, Ford (the European branch), Fiat, Renault, Citroen, Peugeot, Volkswagen, Ducati, KTM, Suzuki (European branch), Triumph, Airbus...

Europe is the biggest vehicle export region in the world. Most vehicle innovation in terms of tech and fuel economy originates in Europe. If you think America is the only innovative country left, you're.. well, to backfire just ignorant.

Fact of the matter is that Europe has a very different mobile phone culture than America, in part due more competition that drives companies to lower their prices. For the past decade, phones have been free or very cheap with contracts where I live. And you might not like to hear this, but that has had a significant contribution to the success of iPhone. Thanks to us humble Europeans :)
Score: 3 Votes (Like | Disagree)
longofest Avatar
147 months ago
Really? Is anyone going to get a phone that is soon to be 3 generations old?

My 3GS is getting tired and i'm sure iOS 5 isn't going to help. I can't wait to palm it off on the sister-in-law.

There are a bunch of costs associated with having so many different product lines going at the same time. You'd either have to tool up another assembly line to do the model, or do a production run of your lowest expected volume model and then retool and switch models, which would leave inventory lying around, and we know how much Tim Cook likes inventory (http://money.cnn.com/2009/01/15/technology/cook_apple.fortune/index.htm).

Inventory, Cook has said, is "fundamentally evil," and he has been known to observe that it declines in value by 1% to 2% a week in normal times, faster in tough times like the present.

I expect Apple to stick to their previous-model and latest-model strategy and not complicate things any more than needed.
Score: 3 Votes (Like | Disagree)
Ugg Avatar
147 months ago
Americans are getting ripped off so bad.

I can see keeping the 3GS for emerging markets, but I would prefer a stripped down version of current tech, rather than something that is 3 years old. If this report is true, it looks like I still won't be buying an iPhone and will have to make do with my Android.
Score: 3 Votes (Like | Disagree)

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