A couple of questions arise now that Walmart is selling iPhones for $97: Will this move by Apple Inc. (Nasdaq: AAPL) to discount last-generation iPhones through Walmart help or hurt its perceived dominance as the leading-edge mobile tech company? And since most of the details of the new iPhone due out this month have already been released, thanks to a careless Apple employee, will the lower price at Walmart convince consumers that the next-generation is not really worth the $400 higher price tag?
And how might all this affect Apple’s future?
Currently, a new-generation iPhone costs $500 to purchase and then incurs monthly charges of $60 ($30 phone and $30 data). Most users are also paying another $40 to $60 per month for in-home Internet and probably use that to connect their iPhones and iPads via WiFi. That's $120 a month so that you can use your mobile device. It doesn't take long to see that $500 is not much of a bargain.
Much of Apple's market share comes from being on the leading edge of things, obviously. The company tends to introduce new gadgets before others have done the same thing and then improves on them almost annually. The iPhone has been on the market for more than three years, and aficionados of the devices regularly begin humming the iTune every June as Apple gears up for another press conference and release of a new version of the phone.
Some consumers, like myself, often ignore new releases from Apple on existing products and just upgrade every other or every third year. Economically, it makes sense, and since Apple is tied to AT&T Inc. (NYSE: T) as the only 3G and phone provider for that carrier's gadgets, adding a new line for a second device (and the included costs) makes little sense.
So for less than a month's connectivity, you can get an iPhone at Walmart now, saving most of your budget for connections instead of the device. Sure, it's last-generation, but do you really need the latest from Apple?
The discounting is likely Apple's response to Google (Nasdaq: GOOG)'s Android phones cutting into market share. Android-enabled phones are traditionally cheaper than the iPhone and are available in a variety of models and on varying cellular networks. While the iPhone is tied exclusively to AT&T, Android phones are available on all major networks in the US.
Given all this, it may soon be that more and more people start thinking that no, maybe they don't need Apple's latest. The iPod is a good example of this. When it first came out more than eight years ago, it was a $400 music player that held 1,000 songs and had a monochrome screen. But it was virtually the only MP3 player on the market. Now it's much more functional, has full color and movie-playing abilities, and costs about $150. Competitors offer similar products for much less, and the market is no longer dominated by the Apple device.
The iPad, which hit the market just a couple of months ago and has since sold more than 2 million units, could suffer a similar fate if other gadget-makers enter the fray with more functional or lower-priced tablets. Now, with both WiFi and 3G versions of the iPad available, the iPad is more vulnerable to discounting and competition.
The iPhone and the iPad cost roughly the same amount of money from Apple (about $500) and perform basically the same functions. The big difference between them is that one is a mobile phone while the other is larger and easier to read. How long will it be before the iPad begins to suffer the encroachment of Google and others?
It's becoming clear that Apple's virtual monopoly on mobile gadgets may not last long.
— Craig Agranoff is an entrepreneur and national social media consultant as well as a published specialist in online reputation management and monitoring.