Apple Inc. revealed Monday that it has scrapped its premium pricing plan for the iPhone and unveiled an upgraded model that works over faster wireless networks, addressing key criticisms about the device that have hurt the company's foray into the cell phone industry. The iPhone's lowest price — for an 8-gigabyte version with the major new features — will fall to $199 when new models go on sale July 11, the Cupertino-based company revealed Monday. A 16 gigabyte model is to sell for $299. The company plans to make up the difference in revenue with sales volume and with subsidies that wireless carriers will now pay for the right to carry the gadget.
In changing the pricing arrangements, Apple is pulling out of some of its revenue-sharing arrangements with wireless carriers, a move that frees the carriers to charge higher prices for the service.
Apple shares fell $4.03, or 2.2 percent, to close Monday at $181.61 on the news, a sign that some investors were hoping for more and others were taking their profits after a four-month run-up in Apple's stock price, which leaped from $120 in March to nearly $190 this month.
The new iPhones are designed to work over so-called 3G, or third-generation, wireless networks and have global-positioning technology built in. They will roll out initially in 22 countries. Apple has inked deals for wireless carriers in a total of 70 countries to carry the new iPhone.
Analysts have said Apple needed to slash the iPhone's price and upgrade it to the faster networks to hit the company's target of selling 10 million iPhones by the end of 2008.