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At $49, an iPod Shuffle or iPhone 3GS is not the cheapest way to enjoy the bounties of an Apple ecosystem, as AT&T has just the dropped the price of a refurbished iPhone 3GS to $9.

As the cloud of expectation surrounding the iPhone 5 release thickens, Apple is still attempting to squeeze out the existing potential of its older iPhone 3GS. AT&T has listed a Refurb black 8GB iPhone 3GS for $99, which when complimented with the Refub discount of $90 comes at $9.

Refurb iPhones are phones which have been returned during the 30-day trial period.

AT&T first slashed the price of the iPhone 3GS from $99 to $49 in January just before the Verizon iPhone could arrive. The further slashing of the prices reveals Apple's strategy to make various models of iPhone available at every price point.

Apple is following a versioning strategy whereby it is offering multiple versions of iPhone with different features at different prices. Recently Apple officially released unlocked versions of iPhone 4. Unlocked versions of iPhone 4 cost $649 for 16GB and $749 for 32GB version. Apple is presently skimming the market for unlocked iPhones by offering the unlocked version of phones at the above stated price point. However, Apple may bring down the price of these devices and may also offer variants of unlocked iPhone 4 - with lesser storage and lesser camera pixels - to gain market share.

BGR today reported that it has received word from its sources that Apple will be launching a cheaper pre-paid iPhone. The phone will be priced at around $350 without contract. It is deemed that the cheaper pre-paid phone will be the iPhone 3GS. It is also reported that Apple will continue to sell iPhone 4 even when it launches an iPhone 5 or iPhone 4S.

Also, last month Deutsche Bank analyst Chris Whitmore forecasted that Apple will release not one but two phones- an iPhone 5 which will come loaded with super specifications and an iPhone 4S, a cheaper version of iPhone.

Whitmore said: With Nokia and RIMM struggling, the time is right for Apple to aggressively penetrate the mid range smart-phone market (i.e. $300-500 category) to dramatically expand its [total addressable market] and market share.

The Deutsche Bank analyst believes that the iPhone 4S will be priced at $349, will be an unlocked model and will come with a pre-paid voice plan.

Apple can thus take the feature phones market by positioning it older iPhones at cheaper prices. Another revelation from T-Mobile, which stated that it has over a million iPhone users on its network, further underscores that there exists a market for cheaper iPhones. Most of the iPhones on the T-Mobile network are pre-iPhone 4 models, which do not have the hardware to support the 3G and 4G networks.

It is widely rumored that the next iteration of iPhone, possibly called the iPhone 5 will feature super specifications like an 8MP camera with dual-LED flash, A5 dual-core processor, a tear-drop design and a 3.7-inch curved glass screen.

In the light of these rumored specifications the iPhone 3GS seems a minnow. iPhone 3GS sports a 3.5-inch display with 400x380 screen resolution and a single rear-facing camera which offers VGA video capture capability.

However, the idea of a cheaper iPhone whether is the older iPhone 3GS or a new iPhone 4S perfectly fits into Apple's strategy to gain market share. It follows its iPod strategy whereby it offers a $49 iPod shuffle as the cheapest point of entry to a $399 iPod touch at a higher price point. It is thus able to segment its market on the basis of price and new models as its devices evolve.

And while the competition in the higher end smartphone market intensifies with the likes of Samsung Galaxy S2, HTC Sensation and Droid Bionic waiting for a showdown with iPhone, Apple can further extend its market share by reaching the lower price segment. These users once in the Apple fold will be locked in the Apple ecosystem with iTunes and iCloud like services. Also, once they are educated in the usage of its iOs devices the users will find it easier to transition to Apple's more expensive devices like iPad 2 and MacBook Air.

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