Apple Could Lower Prices of New iPhones Following iPad Release

Apple could lower the price of its next version of the iPhone in order to better compete in a mobile marketplace increasingly crowded by Google Android, Microsoft and BlackBerry devices, according to a Morgan Stanley analyst.

In a note to investors, reported widely on sites such as Apple Insider, analyst Katy Huberty said she expected Apple to launch a new generation of smartphones in June "that offer both a lower total cost of ownership and new functionality, potentially including gesture-based technology."

Apple's iPhone 3G S currently retails on the company's Website for $199 and up, while the price for the iPhone 3G starts at $99.

Apple has noted some recent successes in the mobile space, including its 10 billionth song sold through its iTunes Store, but faces an increasingly competitive environment from other manufacturers and mobile software makers, including Google, Research In Motion and Microsoft.

On Feb. 15, Microsoft announced Windows Phone 7 Series, the newest addition to its smartphone OS franchise due to go on sale by the end of 2010. If it proves a success among businesses and consumers, it could halt or reverse Microsoft's declining market share in the mobile space, opening another battlefront for Apple.

With its success in the consumer space, Apple has seen its App Store expand rapidly, with research firm IDC predicting that the number of apps on that online storefront will expand to 300,000 by the end of 2011. However, Apple also faces pressure to more stringently regulate and police the App Store's contents, which led to a minor controversy earlier in February when some third-party developers found that their explicit apps had been banned from the store.

According to a Feb. 18 report on TechCrunch, developer Jon Atherton received an e-mail signed by "iPhone App Review" stating that one of his applications contained "content that we had originally believed to be suitable for distribution. However, we have recently received numerous complaints from our customers about this type of content, and have changed our guidelines appropriately."

In a Feb. 22 article in The New York Times, Apple's head of worldwide product marketing Philip Schiller confirmed that the company had been receiving complaints from some groups who found content "getting too degrading and objectionable," and decided to pull those apps from the store.

However, Apple has let adult-themed apps from established companies such as Sports Illustrated remain in the App Store, even as it yanked offerings from smaller third-party developers.

Apple's umbrella justification in pulling those apps comes from a clause in the iPhone SDK agreement, which states, "Applications must not contain any obscene, pornographic, offensive or defamatory content or materials of any kind."

The company previously pulled certain apps from the App Store, such as a "Baby Shaker" app that let users virtually shake an infant quiet, in response from protests from certain groups. It has also taken the step of yanking programs by developers who allegedly post false positive reviews, as it did in December when it removed 1,000 applications by Molinker.

On Feb. 24, bloggers and developers noted that an "Explicit" category briefly appeared on the iTunes Connect System, which is used to submit applications for the App Store. However, that categorization was soon pulled, and debate remains about whether Apple will indeed introduce a restricted category for certain apps, or if the brief appearance was merely some sort of test or glitch.

Huberty also suggested in her research note that the iPad, Apple's tablet computer, would begin to ship in late March and target the market for notebooks selling for under $800. Apple CEO Steve Jobs suggested during the high-profile iPad launch event on Jan. 27 that the device would hit the market at some point within the next two months, which would place it within that same timeframe.

That upcoming release may be linked to a spike in third-party developers building apps for the iPhone OS, according to mobile analytics company Flurry, which noted in a Feb. 12 posting on the company's official blog that developers integrating Flurry analytics into iPhone OS applications in January increased by nearly three times over December. This represented the largest spike that Flurry had ever seen, blogged Peter Farago, vice president of marketing for the company, who went on to suggest that "excitement generated by

Apple's iPad event in January is driving this growth."

Apple has been encouraging developers to download the iPhone SDK 3.2 beta in order to create programs for the iPad, and has suggested that some 140,0000 applications will be available upon the tablet's launch. In addition, applications such as iWork have also been supposedly redesigned to work optimally with the iPad's 9.7-inch LED backlit multitouch display.

Apple has also been negotiating with a variety of companies for content, with a number of online reports in February suggesting that the company would begin offering television episodes through the iTunes store for a dollar apiece; Apple is also supposedly talking to publishers about pricing and distribution deals for popular novels and nonfiction.