Dramatic Price Cuts Announced By Apple

At the company’s developer’s conference in California, Apple stunned their audience with some spectacular announcements – including a decision to slash prices, dramatically.

For example, Apple cut the entry price for an iPhone in half. The 8-gigabyte iPhone 3G, which came out last year, will be reduced to $99 from $199.

But that’s not to say the iPhone is becoming pedestrian. They also introduced two higher priced models -- the 3G S -- that will sport a faster processor and sought-after features like an internal compass, a video camera and an improved photo camera. A 16-gigabyte version of the 3G S will cost $199 and a 32-gigabyte model will be $299.

Mike Abramsky of RBC Capital Markets greeted the news enthusiastically. “I think we’re seeing that innovation is alive and well at Apple”, he says on Fast Money. “And Apple is taking their production efficiencies and passing them along to consumers. (But despite the price cuts) their margins should remain sustained and possibly even boosted by the move in the short-term.”

The newest iPhones go on sale June 19, just as two-year contracts for the buyers of the original models are expiring.

But that’s not the only major price cut. Apple also said new laptops will be about $300 cheaper. Specifically, the new MacBook Pro laptop with a 13-inch screen will now start at $1,200 while a 15-inch model will sell for $1,700 and up – again both are $300 less than existing similar models.

What's the trade now?

I think Apple is a little over-extended here, muses Guy Adami. I think you see it at $130 before you see it higher.

Apple Lower Despite New Phone
Apple Lower Despite New Phone   

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