Analyst: Apple Using Free iPhone 3GS To Fight Android Army

With the release of the iPhone 4S, the price of the iPhone 4 was subsequently dropped to $99. The bigger price move might have been the iPhone 3GS, which can now be had for free, with the standard 2-year agreement. Analyst Shaw Wu believes the iPhone 3GS will account for almost 20% of iPhone sales this quarter.

The move helps Apple compete against the army of Android phones that are being released. While the iPhone 3GS does not have Siri or other features of the iPhone 4S, it’s still an extremely capable phone. Plus, it runs iOS 5, the latest iteration of Apple’s iPhone software. Google’s Android 4.0 Ice Cream Sandwich software will only be available on the Samsung Galaxy Nexus. Even Google’s own flagship Nexus One will not be able to run ICS. There is value in picking up a free iPhone 3GS. Not everyone needs an A5 processor, but having iOS 5 makes the iPhone 3GS up to date. A comparable Android phone would be the Samsung Captivate, but even that is running Android 2.2, with the promise of Android 2.3 Gingerbread.

For Apple’s part, they have cost savings from using older, less expensive parts. The only trouble for AT&T and Apple seems to be keeping the iPhone 3GS in stock. Not unlike the iPhone 4S, stock of the iPhone 3GS were sold out immediately following the price change. A quick check of AT&T does show they are back in stock, but for how long?

Source: Bloomberg