Analyst sees iPhone price cuts as way to lead market

by Jonny Evans

October 28, 2008 —

Apple has the chance to dominate the smartphone industry and could apply iPhone price cuts to achieve just that, an analyst said Monday.

In his latest research note to clients, Needham & Co. analyst Charles Wolf said:

"Apple has considerable flexibility to reduce the price of the phone in tandem with its subsidized price. If Apple were to pursue this strategy, the iPhone could effectively take over the smartphone market," he explained, speculating costs of the device could be slashed to US$99 to stimulate sales.

The analyst estimates the iPhone costs network operators $666 to purchase from Apple, hinting at strong subsidy. And Wolf also noted that the Apple phone has emerged as the "largest revenue and income generator in the company's product portfolio."

On devices competing with the Apple product, Wolf wrote, ""These systems are simply incapable of supporting the development of software applications that match the ingenuity of those written for the iPhone. In the app store, Apple has reinvented the PC maxim that software drives hardware, in this case iPhone sales."

Needham & Co rate Apple a "Strong Buy" with a target price of $240 per share.

Macworld.co.uk