Apple 2.0

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T-Mobile slashes iPhone price 75% in Germany

April 4, 2008: 9:47 AM ET

iphone.pngApple Inc. is not a company known for dramatic price cuts, even when it's clearing inventory in advance of a new model.

So it was something of a shock to read on Friday morning that T-Mobile had slashed the price of the 8 GB iPhone from 399 euros ($625) to a surprisingly low 99 euros ($155).

There's a catch, of course. Buyers at that price must commit to a two-year contract at 89 euros ($140) a month -- something they may come to regret down the road.

T-Mobile is also offering a 29 euro ($45) per month package for buyers willing to pay 249 euros ($390) for the 8 GB phone. In other words, bargain hunters who want to save $235 on the purchase price of the iPhone may end up paying T-Mobile $2,280 more in monthly fees over the life of the contract.

The 16 GB iPhone still costs 499 euros and is available with a minimum 49 euro per month package. (link)

Apple's (AAPL) European partners have been under pressure to lower iPhone prices to compete more effectively with RIM's BlackBerry. They may also feel more pressure than Apple to unload their old iPhones before the new 3G models arrive; unlike U.S. Apple stores, which have been running out of inventory lately, the T-Mobile and the others seem to be overstocked.

"It remains puzzling that iPhone availability has been very scarce in Apple's US stores, yet seemingly plentiful everywhere else," writes Stanford Bernstein's Toni Sacconaghi in a note to clients. "One explanation for this might be that because iPhone's supply shortage came at quarter's end, Apple chose to ship most of its iPhones to the channel, where units would be recognized as sold during the quarter, rather than re-building inventory in its US stores."

"Apple is learning as it goes," writes Piper Jaffray's Gene Munster, who says the kinks in Apple's distribution models have been compounded by "weaker than expected" sales in Europe.

"It seems as if this has led to Apple trickling iPhones into its U.S. retails stores, while T-Mobile and other carrier partners seek to drain their stock of iPhones ahead of a new model," he writes.

There's still no word from Apple when that new model will arrive, but it's worth noting that T-Mobile's sale runs from April 7 to June 30 -- the one-year anniversary of the day Apple began selling the original iPhone.

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Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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