Will Apple Raise the Price of iPhone 5?

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Will Apple Inc. (NASDAQ: AAPL) raise the price of the iPhone 5 above the level it planned before its victory over Samsung? It would not be unusual for a company to use the potential absence of competition to make larger profit margins on what is likely to be a wildly successful product launch.

Before Apple's patent victory last week, the world's largest company by market cap faced an onslaught of relatively new rivals, the most prominent of which was the Samsung Galaxy S III. The Galaxy posted extremely strong sales across parts of Europe. Carriers such as AT&T (NYSE: T) aggressively pushed the Samsung product in America to gain new subscribers. The Galaxy, with its sleek design, advanced features and 4G capacity, became the ideal handset to draw customers as the iPhone 4S aged.

Now the Galaxy S III may no longer be available in the United States if a court blocks its import due to the patent decision.

Apple sells the base iPhone 4S for $199 at its website, with a two-year subscription to a plan from one of its carrier partners. But some retailers have dropped the price well below that level to boost sales to customers who might consider waiting for the iPhone 5 launch. When the iPhone 4S was released last October, it carried a price of $199 for the 16GB model, $299 for the 32GB model and $399 for the 64GB model. Many analysts expected the iPhone 5 to have a similar price structure so that it would not be much more expensive than products like the Galaxy S III.

Apple has time to alter pricing before it releases the iPhone 5 next month. Demand almost certainly will be above the four million iPhone 4S models Apple sold during the first weekend it was available.

One of the worries Wall St. has about Apple is whether it can keep its margins high in the face of increased competitive pressure. Apple could assuage that concern if it set the retail price for the iPhone 5 at $50 per unit above the iPhone 4S price. And, with Samsung painted into a corner, who would say that the small risk the higher price would entail does not make sense?

Douglas A. McIntyre


Filed under: 24/7 Wall St. Wire, Wireless Tagged: AAPL, featured, T
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