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Free Apple iPhone Chatter Airs Again

NEW YORK ( TheStreet) -- "Free Apple (AAPL - Get Report) iPhone" has an ear-catching sound to it.

Citing no sources in his report Wednesday, RBC's Mike Abramsky says Apple is expected to cut the price of the iPhone 3GS to $0 from $50 when it introduces the iPhone 5 in September.
iPhone

The giveaway of the $400 retail, two-year-old iPhone in exchange for a two-year contract isn't exactly a huge leap for Apple and AT&T (T). But it would signal a slight bit of desperation at a time when more muscular phones from Google's (GOOG - Get Report) Android camp are hitting the market.

Abramsky also said that Apple will likely cut the price of the iPhone 4 to $99 with a two-year contract to round out the three tiers of iPhone pricing for the fall.

"This approach is intended to target mid-market smartphone buyers and counter Android's mid-market expansion," wrote Abramsky, adding that the price cuts could double Apple's "market opportunity."

Rumors of free iPhones have been almost an annual event as old models face the usual price cuts. But so far, Apple has never taken the price to zero.

Speculation of the move highlights the debate around Apple on Wall Street where investors have grown weary of waiting for a new product to kick the stock back into the stratosphere. The iPhone 5 promises to be a minor upgrade to the processor and camera, leaving the 4G LTE super-iPhone another year away.

To stimulate growth, some investors argue that Apple should move down market and offer lower priced phones, not only to counter Androids but to hook more people into the broader Apple family of products and services like Macs and iTunes.

But others argue that Apple has no need to expand beyond its premium product niche, as long as there are more dazzling gadgets in the pipeline.

Apple shares were largely unchanged Wednesday at $334.37, roughly flat for the year.

--Written by Scott Moritz in New York.

To contact this writer, click here: Scott Moritz, or email: scott.moritz@thestreet.com.

Follow Scott on Twitter at MoritzDispatch

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