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Apple Eyes Mass Market With New iPhone

By JORDAN ROBERTSON,

Posted: 2008-07-03 16:18:01

Filed Under: Tech News

SAN FRANCISCO (June 10) - The iPhone will soon be $200 cheaper and support satellite navigation and faster Internet access, but higher monthly service charges are likely to erase most of the savings.

Apple Inc. revealed Monday that it has scrapped its pricing plan for the iPhone as it unveiled a model that works over faster wireless networks, addressing key criticisms about the device that have hurt the company's foray into the cell phone industry.

An 8-gigabyte version with the new features will go for $199 when it goes on sale July 11, and a 16 gigabyte model will cost $299, the Cupertino-based company said.

Current iPhone owners who buy a new model and sign up for a new AT&T contract won't have to pay any penalties to get out of their current contract, AT&T spokesman Michael Coe said. And anyone who bought an iPhone in an AT&T store after May 26 can return it before Aug. 1 for full credit against a new one - less a 10 percent restocking fee.

Apple plans to make up the difference in sales revenue with volume - and with subsidies wireless carriers will now pay for the right to carry the gadget.

In changing the pricing arrangements, Apple is pulling out of revenue-sharing arrangements with some wireless carriers, a move that frees the carriers to charge higher prices for the service.

Apple shares fell $4.03, or 2.2 percent, to close Monday at $181.61 on the news, a sign that some investors were hoping for more and others were taking their profits after a four-month run-up in Apple's stock price, which leaped from $120 in March.

The new iPhones, initially to be introduced in 22 countries, are designed to work over so-called 3G, or third-generation, wireless networks and have global-positioning technology built in.

They will also support Microsoft Corp.'s Exchange software, an addition that puts the iPhone in more direct competition with Research in Motion Ltd.'s BlackBerry and Palm Inc.'s Treo smart phones and is intended to appeal to the business market.

Analysts have said Apple needed to slash the iPhone's price and make it usable on faster networks to hit the company's target of selling 10 million iPhones by the end of 2008. Apple said the 3G iPhones download data twice as fast the older ones.

Apple Chief Executive Steve Jobs said Apple has sold 6 million iPhones since the first model launched nearly a year ago and 700,000 since March. That points to a steady slowdown in sales starting in the fourth quarter last year as customers waited for a 3G version.

Jobs showed off the new models of the iPhone and about a dozen new applications for the device at Apple's Worldwide Developers Conference in San Francisco.

New applications range from video games that use the iPhone's motion-sensing technology to guide characters to study tools for medical students and a program that allows users to find nearby cell-phone-carrying friends on a map.

One program brings real-time video highlights and game stats from MLB.com; another receives news from The Associated Press and participating newspapers based on the user's location - and lets the user submit news tips and photos to the AP.

Apple also announced a new Web-based service called "MobileMe," which the company describes as "Exchange - for the rest of us," a consumer-friendly way for people to link their iPhones to their home and work computers so updates entered into one device automatically appear in the others.

MobileMe will cost $99 per year and come with 20 gigabytes of online storage.

AT&T Inc., the exclusive U.S. carrier for the iPhone, said service for it will start at $39.99 per month, plus $30 for unlimited data. That works out to a $10 increase from the cheapest plan for the first-generation iPhone; over the course of a two-year contract, that increase wipes out the savings from the price cut Apple announced Monday.

AT&T's pricing covers only U.S. residents. While iPhone prices will drop outside the U.S. too, it wasn't clear whether other carriers would raise monthly fees to compensate.

AT&T also warned that it will take an earnings hit due to the pricing because new subsidies it agreed to pay will produce the iPhone price cut - not a reduction from Apple.

Apple said in a regulatory filing that under most of its new carrier agreements, it will not receive a share of subscribers' monthly service fees as it has under contracts for the first-generation iPhone.

Jobs said Apple waited to improve the iPhone for use on the faster network because the chips available when the iPhone first came out sapped too much battery life and were too bulky to fit the iPhone's slim design.

The addition of global-positioning technology improves the iPhone's accuracy in locating users. Current versions use a combination of cell-phone towers and Wi-Fi locations to help users figure out where they are.

The 1.73 million iPhones Apple sold in the first three month this year gave it a 5.3 percent share of the worldwide smart-phone market, according to research firm Gartner. Apple has been adding overseas markets gradually with carrier deals.

Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.

2008-06-06 20:44:56

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26 comments

Jacend01 10:18:18 PM Jun 09 2008

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Are you nuts...? Shuv your i-phone up your i-ass. With the economy in the ******* somehow those Apple ******** are worried if I'm going to buy an i-phone. I mean really...are you serious?

WBahhur 09:38:47 PM Jun 09 2008

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Hey...you tech guys...YOU ARE NOT IMPORTANT ENOUGH FOR THIS TRASH!!!!!...Adults playing video games on their phone....I wonder why America is no longer a super power

Solarsteam1 07:56:26 PM Jun 09 2008

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wow-tell jobs to contact solarsteam1 when he is tired of impressing children. With his money and my invention we would be able to impress the world right now!

Kpreval 07:14:54 PM Jun 09 2008

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what happened to my comment!!

Kpreval 07:14:01 PM Jun 09 2008

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Im really mad I spent $400 on my iphone and im so unhappy with it.... Honestly... If you have verizon.. DONT LEAVE FOR THE IPHONE.. I did this and so did many..

Im so mad.. that they lowered the price....

zimmy1002 05:44:58 PM Jun 09 2008

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PEOPLE CAN'T AFFORD FOOD, SHELTER, GAS OR HEALTH CARE AND THEY COME OUT WITH A $200 TOY. I HOPE THAT EVERY PARENT WHO BUYS ONE FOR THEIR KID THINKS ABOUT WHAT SOME POOR SENIOR IS PAYING IN PROPERTY TAXES TO GIVE YOUR SPOILED BRAT AN EDUCATION. DISGUSTING!!!!

PaulGioffre 04:48:51 PM Jun 09 2008

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Genius, people would rather pay later.

CDURB66 04:08:09 PM Jun 09 2008

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Love my iphone, love att. Great customer service from both apple and att.

GOLDDUSTER 03:55:42 PM Jun 09 2008

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I am very happy with mine, only frustrated that four months after I bought it a new and improved one comes out at half the price. Wonder if apple will do something to motivate us early adoptors?

Emperialrealtors 03:54:01 PM Jun 09 2008

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iPhone works great for me. Get real internet visuals, map searches for business is a great tool and many other features. The truth of the matter is that the competition is worried and they all changing their features to match or out do the iPhone. The latest phones coming out resemble the iPhone. It's here to stay and will only get better. Jobs, your the man. Getter done.

ATT does suck, but you can unlock the iPhone by going to the site ZiPhone.org which very simple to unlock. Downlaod games, wall papers and choose another service rather than ATT.

1 - 10 of 26

26 comments