Thursday, June 30, 2011

iPhone 3GS to be free on contract after iPhone 5 release: analyst

The confusing mish-mash of rumors that center on the next-generation iPhone continues to get more complicated. Earlier, it was said that Apple would launch both a cheaper and pre-paid iPhone 4S and an iPhone 5 this September. Now, an analyst believes that Apple may make the iPhone 3GS free with a service agreement when the next-generation iPhone launches.

The information came in an investor note by RBC Capital Markets General Manager Mike Abramsky. Abramsky claims Apple is expected to finally offer a free iPhone (once again, on contract, so hardly free). The idea, much like the iPhone 4S rumor, would be to engage mid-market smartphone buyers and slow the momentum of Android.

Of course, the iPhone 3GS lacks the iPhone 4's FaceTime camera, and obviously the next-generation iPhone would have FaceTime support, as well, although perhaps not the lower-spec iPhone 4S (if in fact it comes to fruition).

Abramsky predicts a doubling Apple’s global addressable market to 150 million smartphones. If Apple were to combine this with an iPhone 4S, what might be wrought? Abramsky currently has an Outperform rating on Apple stock with a price target of $450. Apple stock closed on Wednesday at $334.04.

This might be great for AT&T, but would suck for Verizon. Apple has no CDMA iPhone 3GS, which means Verizon would be left out in the cold with this sort of deal. The iPhone 3GS, at least with current iOS builds, is perfectly capable of running the OS well, despite an outdated processor and lower RAM.

That could push Verizon back to the Android smartphones that kept it going until the iPhone was available on its CDMA network. Of course, anyone watching Verizon's releases can't have missed the large number of Android devices it keeps pumping out, even without an additional reason to push them.

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