Apple Inc.'s (AAPL) decision Wednesday to reduce the price on the 8 gigabyte iPhone from $599 to $399 only 68 days after launch, could upset early iPhone purchasers, but in the long term RBC Capital analyst Mike Abramsky figures the decision should prove positive.
The decision to drop the price broadens iPhone's addressable market, strengthens iPhone's competitive position and lessens a major sales objection, the analyst said in a note to clients. He also said it may drive an upgrade cycle into the holiday season, particularly with users holding off for lower prices.
Near term, Mr. Abramsky said the price cut has only a nominal 1% impact on his fiscal 2007/2008 earnings per share and revenue estimates.
He maintained his outlook of 13.4 million iPhone sales by the end of this year and reiterated his "outperform" rating and C$175 price target for Apple shares.
