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Apple's iPhone En Route for Wal-Mart

James Rogers

Apple(AAPL Quote) has joined forces with Wal-Mart(WMT Quote) to sell its iPhones in the retail giant's stores, ending weeks of speculation that the firms were forging a smartphone deal.

Starting Sunday, Wal-Mart will offer a black 8GB iPhone 3G priced at $197 and a $297 16GB model, available in either black or white. The iPhones, which will be sold in nearly 2,500 stores, will be offered with a new two-year service agreement from AT&T(ATT Quote), according to Wal-Mart.

"Our electronics associates have been preparing for many weeks for the arrival of the iPhone 3G," said Gary Severson, senior vice president of Wal-Mart's entertainment business, in a statement Friday.

Apple's shares rose 96 cents, or 1.13%, to $86 in early trading Friday, while the Nasdaq slipped 0.12%. Wal-Mart's stock rose 4 cents, or 0.07%, to $55.48. Those shares closed at $85.81 and $55.35, respectively.

The Wal-Mart deal offers the iPhone a major boost at a time when tech spending is slowing and a handful of companies are jostling for market share. Apple, like its rival Research In Motion(RIMM Quote), has been chipping away at Nokia(NOK Quote)'s dominance of the smartphone market in recent months. With the Wal-Mart deal, Apple has effectively opened up another front in its war with the Finnish firm.

The blogosphere has also been rife with rumors of a 4GB $99 iPhone, sold via Wal-Mart, during recent weeks, although this now seems extremely unlikely.

The Wal-Mart deal, however, is not be the first time that Apple has used the retail sector to extend its smartphone reach. Best Buy(BBY Quote), for example, sells a number of Apple's handsets in its stores, priced from $189.99 for the 8GB iPhone 3G.

Analyst firm Morgan Stanley recently warned that plummeting consumer-technology sales could spell trouble for Apple's stock during the coming months. The tech giant's share price has certainly struggled and is currently trading well below its 52-week high of $202.96. Other analysts, however, feel that Apple remains better positioned than many of its rivals, largely thanks to the iPhone.

Clearly buoyed by the summer launch of the iPhone 3G, Apple's smartphone business has been growing rapidly. Third-quarter iPhone sales grew more than 327% year over year, according to analyst firm Gartner, while Nokia's fell 3%.

Apple also is said to be planning a low-cost netbook-style computer that will provide users with Web access and email, although the firm has not confirmed these rumors.