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iPhone subsidy ripples across industry

Posted Jun 26 2008, 04:24 PM by Kim Peterson
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AT&T is biting a $1.2 billion bullet in its decision to sell the upcoming 3G iPhones for $200 and $300. The telecom giant is buying the phones from Apple and selling them at a loss, which the company said will dilute earnings by 10-12 cents a share this year and next.

AT&T's decision is rippling across the industry, RCR Wireless reports. Sprint is selling its iPhone competitor, the Instinct, for $130. The phone had been expected to price around $200. Analysts say we may see a $199 ceiling for devices from now on in a smartphone price war, thanks to AT&T and Apple. (Sprint said today the Instinct broke company sales records in its first week).

In related news, research company iSuppli estimates that Apple pays just $173 to produce the new 8GB iPhone. That's down from $226 for the original iPhone, and is mainly due to a drop in component prices. Isuppli estimates that Apple gets about $300 for every iPhone sold.

If that's true, and if Apple sells 15 million 3G iPhones this year -- as some analysts are forecasting -- then the company stands to get around $4.5 billion in handset sales revenue. That doesn't count the revenue from the first-generation iPhones already sold this year. Not bad for a company that reported $24 billion in sales for its last fiscal year ended Sept. 29, 2007.

Apple shares dropped 5% today to $168.26. That's likely due to Sprint's Instinct sales news and a disappointing earnings report from Research in Motion dragging down the industry.

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Comments

 

I work for AT&T.

R S (Posted 06.26.08 5:26 PM)

Instinct is just a plain copy of iphone.

I don't have an iphone, neither am I  one of those crazy Mac lovers, but anyone can see that iphone idea  was created by Apple and it has been copied by hundreds in order to profit from it.

Shame on Sprint and it's INSTINCT.

Josh (Posted 06.26.08 6:16 PM)

are you going to get upset at bridgestone for making tires like everyone else? you're an idiot for knocking people for taking an idea and trying to make it better and give the consumer more choices.

second it was Palm that created the hand held touch screen market in smart devices. i would think that apple is copying them in reality, not the other way around. windows mobil smart phones do more than an iphone also.. in reality iphone is a joke in comparison. the only thing the iphone has is a bigger screen.. wow, big deal

sam neale (Posted 06.27.08 9:26 AM)

That's how the market works.  One good idea spawns countless attempts of recreation from other companies.  It's good in the sense that the ones that come after often have the opportunity to improve upon the existing idea, but bad also because sometimes those companies just put out pieces of scrap just to get a piece of the market.  Just make sure and do your research before you buy.

beege (Posted 06.27.08 11:52 AM)

INSTINCT IS SO COOL.........

MAC (Posted 07.08.08 9:51 AM)

instinct phone is relly cool..fast internet access and a stylish phone.thanks to sprint they got this kind of phone..

mac (Posted 07.08.08 9:53 AM)

Apple has a 16 year history in the handheld market. Much longer than many of it's competitors. The Apple Newton MessagePad was the first modern handheld complete with handwriting to text conversion. It was produced for 6 years in the 90's, but it failed mainly because of it's high price, $1000, and it wasn't small enough to actually fit into a shirt or pants pocket. Another contributor to it's demise was the fact that PC synchronization was not built-in, you had to pay extra!! Even in 2006 the almost 10 year-old Newton was declared better than the Samsung Q1, a contemporary handheld:

digitalliving.cnet.co.uk/.../0,39030785,49282099-1,00.htm

Also Palm, Inc., was founded by an ex-Apple employee.

All that to say that Apple certainly can lay claim to having started the handheld revolution.

John (Posted 07.08.08 11:26 AM)

dont forget about the verizon dare. it really cool. and smaller.

dare not (Posted 07.13.08 2:16 AM)

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