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Apple May Subsidize iPhone: Another Sign The iPhone Is In Trouble?

One analyst claims that Apple is seriously considering a subsidy strategy for the iPhone. This is completely the opposite of what Apple planned to do when it launched the iPhone in January. Could this be yet another sign that Apple is scrambling to save the iPhone?
One analyst claims that Apple is seriously considering a subsidy strategy for the iPhone. This is completely the opposite of what Apple planned to do when it launched the iPhone in January. Could this be yet another sign that Apple is scrambling to save the iPhone?American Technology analyst Shaw Wu claims that Apple is rethinking its reseller and distribution for the iPhone:


"We are hearing rebates of $50-150 that will be offered by AT&T to lower the price points for iPhone (currently $499 for 4 GB and $599 for 8 GB) and to entice customers to sign longer term voice and data contracts," the analyst wrote. "From AT&T's perspective, a rebate is a great marketing tool and small sacrifice to make to entice a customer to sign up for 2-year voice and data cell phone plans that cost about $75-100 per month (before taxes and fees), meaning $1800-2400 in 'guaranteed' bi-annual revenue."

And that's not all. AT&T may pay Apple for each customer it signs up:


Wu also told clients that he believes Apple will be paid a "bounty" for each AT&T customer it signs up through its retail and online stores. "In addition, Apple will likely participate in a revenue sharing agreement where part of the monthly fee charged to customers will go to Apple ," he explained. "Besides the hardware, Apple 's value added for the iPhone to AT&T is its marketing, customer service, and unique software and features, including visual voicemail and the most complete PC experience on a cell phone."

Last week I suggested that there may be signs that Apple is working hard to save the iPhone. My suggestions met with severe criticism from some bloggers and many of my readers.

While Apple likes to poke fun at Microsoft for being late with products like Vista, the company is hardly immune to product delays. Just last week Apple announced a delay for its newest operating system, Leopard, in large part to accommodate the ever-growing needs of the iPhone.

I don't point this out to pick on Apple. Product delays are common for both new hardware and software. And given the challenges Apple faces with the iPhone (the company's first mobile phone), this question is hardly out of place.

And I'm not alone here. Even developers are beginning to question Apple's decision to take engineers from Leopard and send them to the iPhone team. As this blogger asks, hasn't Steve Jobs read The Mythical Man-Month?

And now, we get word from an analyst claiming that Apple may change course on its pricing model for the iPhone. There is no other support for this rumor, yet. But, if it's true, then it could be another sign that Apple is scrambling to save its first foray into the handset market.

What do you think? Is this analyst rumor just another turn of iPhone rumor mill? Or could the iPhone be in trouble?

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