Monday, June 15, 2009, 03:00 pm PT (06:00 pm ET)
Apple says iPhone 3G S pre-orders will be filled on timeDespite warnings from AT&T that claimed high demand for the new iPhone 3G S would prevent it from shipping pre-orders by the June 19 launch date, Apple is still promising to satisfy all web pre-orders with a Friday delivery.
The Boy Genius Report cited internal sources at AT&T as saying that customers who had not ordered the new phone by June 15 would have to wait one to two weeks after the launch to receive their order or stand in line to buy one.
While availability of the new iPhone at AT&T stores is still uncertain, there appears to be no shortage on Apple's side. The company's website continues to take pre-orders for the product without reservation, informing users that their new phone will be shipped to arrive on time on the 19th, with free shipping to boot.
Early pre-orders are reportedly already shipping.
The introduction of the new iPhone 3G S at $199/$299, down from the original $499/599 for the first generation iPhone, and the slashing in half of the current iPhone 3G's price tag are expected spur demand significantly. While Apple will likely increase its market share as a result, concerns are being raised about the companys ability to sustain its historically high margins.
On June 9, following the price-cut announcement at WWDC the previous day, Keith Bachman of BMO Capital Markets summarized the companies move, saying Apple is playing the [price] elasticity curve.
The key to keep margins from falling below the 34.8% level they reached in the year-ago period is for Apple to sell so many units that volume counteracts decreased per-unit revenue.
Gene Munster of Piper Jaffray told Marketwatch that, "historically, a 50% cut in iPhone pricing has increased demand by two times [over prior sales levels]. The bottom line is we are increasingly confident in our iPhone estimates."
New volume must be great enough to make up for the $1.3 billion projected loss from the cuts, according to Samuel Wilson of JMP Securities. The firm is warning investors to not expect increased margins this year, and estimates third quarter margins to come in at 33%.
In addition to greater volume of sales, the broader market created by the $99 entry level model and a revamped new version will drive the same economies of scale that enabled Apple to remain fiercely competitive in iPod pricing while retaining relatively high margins.
Undercutting Apple in price in the smartphone market will be even more difficult for competitors than matching or beating the price of the iPod was. Additionally, Apple's leading library of mobile apps also play a role in differentiating and adding value to the company's iPhones, tipping the scales for many buyers who might be open to considering other devices.
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