Apple Keeps It Regular

Apple (AAPL Quote) was bruised slightly Monday despite delivering a price cut on the iPhone.

Shares of the Cupertino, Calif.-based gadget shop closed down 82 cents to $143.85, after investors came away from the company's Worldwide Developers Conference in San Francisco with a mix of news.

The biggest new product announcement was a souped-up iPhone that basically adds more memory and a 3-megapixel camera with video. It's worth noting that Apple rivals like Research In Motion (RIMM Quote) and Palm (PALM Quote) have long sold phones with video and room for memory cards.

In a nod to the competition and budget-minded gadget buyers who had found the iPhone out of reach, Apple -- as many predicted -- cut the price of the current iPhone to $99.

Analysts' have predicted that the cheaper iPhone will bolster Apple's top line. RBC analyst Mike Abramsky forecasts that Apple will sell 5 million $99 iPhones this year, and 22 million next year, a 40% sales increase.

The price cut won't cause Apple much pain beacuse its margins were luxuriously wide to begin with. As Collins Stewart analyst Ashok Kumar wrote last week, the cost of building an iPhone is about $130. Apple gets a commission and a cut of the monthly customer revenue from AT&T(T Quote). Apple cutting the price to $99 will "stimulate demand," says Kumar.

During the show, Apple announced a refreshed MacBook Pro laptop line and cut the price of its supersleek MacBook Air, but the company failed to lower the prices of its lower tier notebooks to help resuscitate falling computer market share.