Apple 2.0

Covering the business that Steve Jobs built

Analyst: The $99 iPhone will increase sales twofold

June 8, 2009: 6:34 PM ET

$99 iPhone 2009The price cuts Apple (AAPL) announced Monday on the MacBook and iPhone lines are "significant" and surprisingly aggressive, writes Piper Jaffray's Gene Munster in a note to clients issued after the WWDC keynote was over.

Historically, he writes, a 50% cut in iPhone pricing has increased demand twofold.

He's referring to the last year's cut to $199 from $399. That price reduction was actually accompanied by a tripling of global unit sales (from 4.7 million to 15 million), but some of those sales were in overseas markets. U.S. sales in that period, he estimates, increased twofold.

The MacBook price cuts were more modest -- between 5% and 15% -- but make Munster "increasingly confident" in his near-term Mac estimates (2.2 million Macs in the third fiscal quarter; 2.4 million in fourth quarter, which ends in September).

The pricing on OS X Snow Leopard was even more aggressive; it's scheduled to ship in September for $29 (for current Leopard users), as opposed to the typical $129 operating system upgrade.

Munster says he's not worried about the impact on Apple's bottom line, however. He notes that when Leopard shipped in 2007, the Mac user base was about 23 million. Today Apple announced that its user base has grown to 75 million active OS X users.

Munster, having predicted that Jobs would return to Apple by the end of June and not before, claims he is not surprised that the CEO was a no-show Monday.

Apple's World Wide Developers Conference runs until Friday.

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About This Author
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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