The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (

Trefis

) --

Apple

's

(AAPL) - Get Apple Inc. (AAPL) Report

iPhone has seen tremendous success since its launch in 2007. But competition from

Google

's

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Android-based smartphones,

Microsoft

's

(MSFT) - Get Microsoft Corporation (MSFT) Report

Windows phones and

Research in Motion

's

(RIMM)

BlackBerry are gaining ground.

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The average price of an iPhone has declined from an estimated $868 in 2007 to $610 in 2010, an attempt by Apple to keep itself competitive in the smartphone race and maintain its market share. Although price cuts will boost iPhone sales, this could come at the cost of margins, which are already seeing a declining trend.

While we anticipate the average price of the iPhone will continue declining to around $408 by the end of our forecast period, Trefis members predict a slower price decline reaching $507. The member estimates imply an upside of 12% to our

Apple stock price

estimate.

We currently have a Trefis price estimate of $430 for Apple's stock, above the current market price of $348.

Apple is already feeling the heat from Google's Android platform for smartphones. According to IDC, Android's share in the overall smartphone OS market will be close to 40% by the end of 2011, double

Nokia

's

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Symbian, while BlackBerry and iPhone iOS will stagnate at 14.9% and 15.7%, respectively. The research firm further predicts that by 2015 Windows Phone 7 will surpass iPhone sales with a market share of 21%. The growth will mainly come from its partnership with Nokia which will drop its Symbian OS in favor of Windows. We can safely say that Android and Windows will be the two leading smartphone OS providers in the years to come, and this will definitely put significant pricing pressure on Apple to maintain its market share.

Earlier this year AT&T announced that it will reduce iPhone 3GS price to $49 from $99. Apple is also working on a new line of less expensive iPhone, which will be half the size of the iPhone 4. The move to offer cheaper iPhones should help Apple gain smartphone market share, but this could come alongside lower average pricing and reduced profit margins.

An expanding addressable market could, however, save Apple's margins from declining further and boost sales. Apple can benefit significantly from the availability of iPhone 4 on Verizon's network, which has a subscriber base of more than 90 million in the U.S.

With AT&T acquiring T-Mobile, Apple becomes an indirect beneficiary as it has the opportunity to sell the iPhone to T-Mobile's 34 million subscribers. This creates an opportunity for Apple to expand its market share. As a result, strong annual growth in iPhone sales could prevent a sharp decline in iPhone's margin and average price, as suggested by Trefis members in the chart above.

Our

complete analysis for Apple's stock is here.

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