Apple to “Give Away” the iPhone 3GS
Also, while it will take at least 18 months to build up decent market share, Apple are also getting a little worried about Microsoft’s Windows Phone 7 smartphone operating system. Microsoft have gone from zero to almost 6 percent and are forecast to move into third spot by mid-2012.
Nokia just released the Lumia 800 Windows Phone smartphone and the upgraded Sumsung Focus Windows Phone smartphone is about to be released. Reviewers are giving both these phones and the upgraded (v7.5) Windows Phone 7 operating system good reviews.
The problem for Apple, and for the Android phone manufacturers, is, should Windows Phone start to get some real traction and gain market share, then where is this share going to come from? Apple’s share or the Android group or Nokia’s ‘old’ Symbian share?
Apple have a whopping 55 percent of profit margin in their phones compared to an average of about 20 percent for most of the other phone manufacturers. This means for every phone Apple sells other manufactures have to sell at least two phones to make close to the same margin.
Even so, Apple are still not happy.
So, according to an item at Mashable (here), they are going to “give away” their twice superseded iPhone 3GS—superseded first by the iPhone 4 and then the iPhone 4S.
Okay. When you dig up the details they are not really giving anything away. But the advertising will say something like “Get a free iPhone 3GS”. The catch is—it is only “free” on a two year contract. While you might even technically be getting the phone itself free Apple will be getting paid about $199 for the phone by the carrier out of the $1,200 two year contract.
As the estimated cost for Apple to make the relatively old technology iPhone 3GS is $99 then they will still be making somewhere around $100 per phone profit even though the consumer is getting the phone “free”.
Apple’s thinking here is that most people really would prefer to buy an iPhone and the only reason they are taking the Samsung, HTC, Motorola, Nokia, or Blackberry path is because the iPhone 4s is too expensive. So, by making the iPhone 3GS “free” these people can avoid the humiliation and shame of buying a non-iPhone phone and, instead, get themselves into a two year contract “free” iPhone 3GS.
My view is that this thinking is flawed. Firstly nobody in the IT group where I work owns an iPhone. They all have Android phones as their personal phones and the company standard for a company phone is a Blackberry. They are all very well paid. The cost of an iPhone was totally NOT the reason they did not get an iPhone. They went with other brands either for battery life, antenna performance in weak coverage areas, larger screen, ability to use removable SD memory, or some other reason (such as “I hate using iTunes”). Basically it is my experience that IT people don’t use Facebook and don’t buy iPhones.
Anyway, it will be interesting to see how this strategy works out for Apple and if it does really get them more of the market.
