iPhone Business Model

With the launch of the iPhone 3G, Apple dropped the price point to a carrier-subsidized $199 for the 8GB model. Naturally, that led the usual suspects to complain it wasn't cheaper. It should be $99. It should be free. They should pay us $199 to take it!

Somewhat -- if only slightly -- more seriously, however, that's pretty much what Apple Insider says Morgan Stanley analyst Katy Huberty's studies are showing, with fully 46% turning their nose up at the current price point. She claims that sales of the iPhone 3G were half as strong in September and October when compared to July and September, and suggests:

To spike sales, Huberty suggests that Apple should take a cue from recent rumors and halve the price to $100, which she believes could at least double iPhone sales numbers. Apple's prized profit margins likely wouldn't be an issue, she claims, as the company only needs to reduce the cost of manufacturing and selling an iPhone by 17 percent to achieve the intended effect.

In addition to the launch buzz, pent up demand due to lack of iPhone 2G supplies prior to 3G launch, Kaufman analyst Shaw Wu points out that gift cards for the iPhone may cloud holiday numbers, with revenue from those sales not being counted until the iPhones are actually picked up and activated later.

Of course, everyone loves free stuff. However, few people would want to work for free or give away what they make without recompense, but who ever said the intertubes (and analysts) have to be self-consistent? So the question remains, is the $199 iPhone still too expensive? If so, what price should it be?