Wal-Mart (NYSE: WMT) will cut the price of the Apple (NASDAQ: AAPL) iPhone 3GS, the top of the company’s smartphone line, by over half to $97 if customers commit to a two-year subscription. Analysts see the action as a confirmation that Apple is about to come out with a 4G-ready phone and needs to clear out inventory of the 3Gs. Apple sells the same smartphone for $199.Apple’s developer’s conference starts June 7 and analysts believe that the 4G iPhone will be introduced then. The product’s success depends on the successful roll-out of Sprint-Nextel’s (NYSE: S) WiMax network and anticipated LTE 4G system from AT&T (NYSE: T) Wireless and Verizon Wireless.
The 4G phone will replace the 3GS, the current iPhone flagship, and the decision carries risk. There are 3G networks across the US and in many overseas countries. That means the Apple smartphone has a ready base. The new 4G systems are still immature and not available in most US cities. US 4G coverage may not be significant for another two or three years And, there is no guarantee that the technology will not have the early glitches that users come to be expected with new services.
Apple could be premature in killing 3G products for 4G ones. The huge consumer electronics company has relied on product design and function to sell smartphones in the past. But, it has never had to worry about the wireless technologies and systems that power the handsets. Apple is about to gamble on whether 4G is a success.
It is hard to define if 4G is a hit. Adoption rates may be slow. The faster networks may not appeal to consumers who are already satisfied with 3G. Apple will have to gauge its manufacturing plans for a market which is still in its infancy and planning for the unknown has not been a part of Apple’s success.
Douglas A. McIntyre
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