updated 11:10 am EDT, Fri September 7, 2007
iPhone Price and Moto/Palm
The unexpected iPhone price cut is likely to pose a major challenge for its immediate rivals in the smartphone business, according to new financial analyst reports. While the Apple phone is still expected to sell at a premium relative to most competitors, the reduction will narrow the gap between the handset and other high-profile competitive models, many of which were expected to thrive in part due to an assumed larger gap. Palm in particular may take one of the largest hits, according to Oppenheimer researcher Lawrence Harris, as some of the company's phones are priced the closest to the Apple device and share a similar mixed-media focus.
"It has the potential to take away from Treo sales," Harris said. "I think that's why you're going to see additional emphasis on cheaper models like the Centro."
The new Palm phone is rumored to release through Sprint in early October for $99 with a contract and would be intended to invert the traditional smartphone market, appealing to younger or first-time buyers without the income or desire to buy a more expensive model.
Motorola is also expected to suffer from the iPhone's $399 price. The RAZR2 was launched this summer in an attempt to recapture the success of the original RAZR and includes faster Internet access than the Apple device, but is now priced relatively close at between $250 and $300 after factoring in a service agreement. The smaller gap may discourage buyers from considering the RAZR2 now that cost is less of an issue and could make attendees of today's Motorola analyst meeting anxious for news of a more direct response. "It does put pressure on Motorola to show some new products or discuss their product strategy on Friday," Harris noted.
On Wednesday, Motorola admitted that needed to diversify its phone lineup rather than rely on a single popular phone to carry its sales, which have slumped in recent years. But the company should still be thankful that Apple has entered the market at all, said chief finance officer Tom Meredith. The insistence on including Wi-Fi with the iPhone has broken a traditional resistance by carriers to the technology, which could theoretically siphon money away from lucrative data plans.
"I think Steve [Jobs] and Apple did companies like Motorola a favor in that regard," Meredith said.