Free iPhones Looks Like a Winning Strategy for Apple

While many people have turned their noses up at Apple Inc.’s (NASDAQ:AAPL) two-year-old iPhone 3GS model, its recent price slashing has turned out to be a good decision by the company. It is now poised to compete against Google Inc. (NASDAQ:GOOG) Android software this holiday season.

The iPhone 3GS is currently free if a consumer commits to an AT&T (NYSE:T) contract.  This doesn’t wreak too much havoc on Apple’s profits as the company receives cost savings by using older, cheaper parts. The phone lacks the bells and whistles of the new iPhone 4S, but it’s a good alternative compared to its competitors.

According to Roger Entner, founder of market research firm Recon Analytics LLC,

“Apple can shovel them out by the millions,” he said. “What free phone or even $50 phone is going to be more appealing to consumers than an iPhone 3GS?”

AT&T (NYSE:T) saw great demand for 3GS when Apple (NASDAQ:AAPL) slashed the price on Oct. 4; it immediately sold out of them. They are currently the only carrier to offer this deal because of its technology and Apple has not said when their supply will be replenished.

With holiday sales about to begin, look for AT&T to aggressively market the phone. Apple will try to regain market share taken away from Samsung Electronics with its Android phones. Consumers should see some good deals over the holidays while both companies will get some Christmas cheer from increased sales.

Here’s how these hot stocks closed the week:

  • Apple Inc. (NASDAQ:AAPL): The shares recently traded at $400.24, down $2.83, or 0.7%. Its market capitalization is $371.93 billion. They have traded in a 52-week range of $297.76 to $426.70. Volume today was 10,793,856 shares versus a 3-month average volume of 22,121,000 shares. The company’s trailing P/E is 14.46, while trailing earnings are $27.68 per share. About the company: Apple Inc. designs, manufactures, and markets personal computers and related personal computing and mobile communication devices along with a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, third-party wholesalers, and resellers. Get the most recent company news and stock data here >>
  • Google Inc. (NASDAQ:GOOG): The shares recently traded at $596.14, down $1.36, or 0.23%. Its market capitalization is $193.08 billion. They have traded in a 52-week range of $473.02 to $642.96. Volume today was 2,835,379 shares versus a 3-month average volume of 3,672,410 shares. The company’s trailing P/E is 20.32, while trailing earnings are $29.34 per share. About the company: Google Inc. is a global technology company that provides a web based search engine through its website. The Company offers a wide range of search options, including web, image, groups, directory, and news searches. Get the most recent company news and stock data here >>
  • AT&T, Inc. (NYSE:T): The shares recently traded at $29.16, down $0.28, or 0.95%. Its market capitalization is $172.80 billion. They have traded in a 52-week range of $27.20 to $31.94. Volume today was 18,416,228 shares versus a 3-month average volume of 34,842,700 shares. The company’s trailing P/E is 14.75, while trailing earnings are $1.98 per share. The company pays a dividend of $1.72 per share for a dividend yield of 5.90%. About the company: AT&T Inc. is a communications holding company. The Company, through its subsidiaries and affiliates, provides local and long-distance phone service, wireless and data communications, Internet access and messaging, IP-based and satellite television, security services, telecommunications equipment, and directory advertising and publishing. Get the most recent company news and stock data here >>