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iPhone 4S, iPhone 4 discounted by $49.01 in Apple stores – what does it mean for Android?

August 9, 2012

In case you didn’t hear, Sprint has recently decided to lower the price of the 16GB iPhone 4S model to $149.99, which is 49.01 lower than its regular price, while also waiving the activation fee. The carrier is apparently doing this as an attempt to try to move as much iPhone stock as possible in anticipation of the upcoming sixth-generation iPhone.

While that’s certainly not a surprising move for a carrier, or for third party retailers – Best Buy and Radio Shack also have discounted offers on iPhone models – it’s certainly worth pointing out that some actual Apple retail stores are ready to match the discounts available from these third-party retailers on a case-by-case basis.

This move is something unheard of in the iPhone business, at least for Apple, as the company has always sold the iPhone for full price, ignoring similar offers from other companies, even when approaching a new iPhone launch.

In fact, the only time Apple is discounting its iOS devices – not including refurbished devices sold through its online store – is after the launch of a next-generation device. It’s only then that Apple usually shaves off $100 from the price of the previous-generation device, in case it keeps selling it in store.

Currently, the official iPhone prices – and I’m referring to subsidized devices here – are $199/$299/$399 for the iPhone 4S, depending on storage capacity, $99 for the iPhone 4 and $0 for the iPhone 3GS.

MacRumors has obtained a screenshot that reveals that Apple stores will offer a $49.01 discount on iPhone 4S and iPhone 4 models, but the sale won’t be made public. That means you’ll have to request the lower price in store, citing the store that’s selling the chosen iPhone model for next.

Assuming the leaked image above is not a fake, then why is Apple willing to lower the price of its iPhone by $50 and why does it matter for Android buyers?

iPhone 5/6 Arrival

The next-generation iPhone – iPhone 5, as it’s mistakenly referred to by tech blogs instead of the more logical iPhone 6 name choice – is expected to be announced on September 12, and launched in up to two weeks later. The news has not been confirmed by Apple at this time, but as we approach September we’ll know more about the next major Android adversary.

Since the hype around the new “iPhone 5” is reaching higher and higher levels as we get closer to the launch of the handset, it’s likely that some potential iPhone buyers will refrain from buying a 2010 iPhone 4 or a 2011 iPhone 4S and wait for the next-generation device that’s expected to be a major product refresh when compared to its predecessor.

Due to this increased buzz, Apple iPhone sales tend to somewhat decrease in anticipation of the new iPhone launch, and maybe Apple is interested in selling as much exiting iPhone stock as possible in the months/weeks preceding the launch of the new device.

But that may not be the only reason Apple is willing to consider discounting Android devices.

Android Pressure

The price of an Android device tends to goes down in the months following its release. From Amazon, and third-party retailers, to carriers that offer the device for subsidized prices, various discounts can be seen, even for once-flagship devices – the best example right now is the Sprint Galaxy S3 selling for $99 on Amazon.

That happens because in the Android ecosystem a new star is born every few months, and that star captures the full attention of the media but also of the consumer only for a few months – depending on how hot the device is – right until the next best thing comes along.

But this fast turn around of Android devices help carriers sell a large number of Android devices each quarter, and, overall, helps Android become the leader in the smartphone business when looking at market share numbers.

Is then Apple trying to fight off Android pressure especially at this time, when its iPhone sales are at the lowest level of the year, as people are waiting for the new iPhone to hit stores? Is Apple trying to make its iPhones even more appealing by dropping their starting subsidized prices in order to better compete against ultra-affordable Android smartphones?

Apple has never tried to be the number one smartphone maker by market share, as the company is able to command a different top that it may be a lot more interested in, overall profits. That’s where Apple is king, as the company is able to keep its iPhone margin high, by not budging when it comes to dealing with carriers on the price of the smartphone.

While HTC has financial difficulties despite having some very interesting Android handsets out there, Apple manages to cash in on its iPhone’s popularity quarter of the quarter. The best example here is the iPhone 4, the company’s only iPhone that was the Apple flagship smartphone for more than a year – launched in June 2010, the iPhone 4 was replaced only in October 2011, and throughout the period it sold very well quarter after quarter.

So then, are there other reasons for Apple to decide to discount, even though only on request, the price of the iPhone in its retail stores?

Carrier Subsidy

The iPhone is a nightmare for the carriers, and there’s no secret about that. No major operator can afford not to carry the iPhone – just look at Sprint, which only got it in late 2011, and T-Mobile, which still doesn’t officially support it (there are over 1 million iPhones on the network) – but no carrier is completely happy with Apple.

Not only is Apple not willing to let carriers dictate any terms when it comes to iPhone hardware, and more importantly, crapware software, but Apple has a tough stance on its pricing model. Carriers spend a lot of cash on iPhone subsidy upfront, and while they make that cash back, and then some, during the contract iPhone buyers are locked in, the fact still remains that those subsidies affect the bottom line.

Is Apple therefore willing to show carriers that it’s willing to change its stance on iPhone pricing in order for carriers to push iPhone sales over, say, Android or Windows Phone sales – just recently AT&T was rumored to have issued an internal memo advising staff to recommend Android and Windows Phone devices over iPhones in its retail store, a rumor that was categorically denied by the carrier, but certainly raised enough eyebrows.

At the same time, Apple is probably least worried about mobile operators right now because it’s already working with a large number of carriers around the world, and plenty of customers would be ready to jump ship to the competition to get the iPhone.

New Management

We’ll also point out that this move comes under new management. Tim Cook has been the ruler of Apple for almost a year now – not counting his acting-CEO times – and he has made various decisions that were not necessarily in line with what Steve Jobs would have done.

Nevertheless, Apple’s stock is on the rise, and the company has sold record numbers of iPhone 4S and new iPads, its latest smartphone and tablet model with him at the helm. So there would be no apparent reason for Cook to decide to selectively drop the price of its iPhone models – the same $49.01 discount is not available in Apple’s online store – with a few weeks/months to go until the launch of the new iOS smartphone generation.

Without official information from Apple as to why the company has chosen to offer such discounts, we can’t but speculate on the reasons, and wonder what it all means for Android and the whole smartphone ecosystem. But we’ll certainly keep an eye on Apple, especially at this time of year, when new products are about to be launched.

Is anyone switching from Android to “iPhone 5”?