Monday, February 26, 2007

We Won't Pay $500 For An iPhone

Consumers aren't willing to pay what Apple Inc. may ask for the iPhone, but if the price drops they'll switch their mobile service to AT&T Inc. in order to get it, according to results of a survey released Thursday.

Online market research firm Compete Inc. surveyed 379 people in the U.S., most of whom had heard of the iPhone and have shopped for an iPod, to find out how interested they are in the device. The iPhone is a combined music player and cell phone that Apple plans to start selling in the U.S. in June.

Among the 26% of respondents who said they're likely to buy an iPhone, only 1% said they'd pay $500 for it. When Apple introduced the iPhone in January, it said it would cost $500 on the low end.

Forty-two percent of those who said they're likely to buy the phone said they'd pay $200 to $299.

The iPhone will be available only to subscribers of Cingular Wireless LLC, now part of AT&T. In a blow to the operator's competitors, 60% of the respondents who said they were likely to buy the phone said they'd switch their mobile operator in order to get it.

While the iPhone has been discussed as a competitor to other handsets like Research In Motion Ltd.'s BlackBerry, the two serve very different markets, said Andy Neff, an analyst at Bear Stearns & Co. who participated in a conference call to discuss the study results. "Even though there's talk about this as an alternative to RIM, it's not a corporate product," he said. Instead, the iPhone is an indication of a broad shift toward smart phones and the emergence of niches within the category, he said.

The analysts were split on what price they think the device will ultimately retail for. Recently, operators haven't been discounting phones in the similar price range as the iPhone, said Phil Cusick, an analyst at Bear Stearns.

However, Apple has been known to announce a product with one price and ultimately sell it for less. Apple TV, for example, was expected to cost $399 but sells for $299, he said.

The phone may start out around $500 because early adopters will pay that, said Neff. But pricing will likely drop by $100 to $200 to target the mass market, he said.

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