Last Saturday, Wal-Mart Stores, Inc. (NYSE:WMT) permanently lowered its already discounted price for Apple Inc. (NASDAQ:AAPL)‘s iPhone 5 and 4S on a two-year contract. Available in stores only, shoppers can now score an iPhone 5 for $129 or an iPhone 4S for $39 with a fresh two-year contract from Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), or Sprint Nextel Corporation (NYSE:S).
Often permanent discounts are precursors to product refreshes, but Apple Inc. (NASDAQ:AAPL)’s upcoming iPhone 5S isn’t expected to be available until sometime this fall. As you can imagine, the timing of this development could be interpreted as troubling for Apple investors.
The neighbor’s cleaning house, too
Wal-Mart Stores, Inc. (NYSE:WMT) isn’t the only retailer that’s allegedly cleaning house on iPhone inventory. Best Buy Co., Inc. (NYSE:BBY) has extended a promotion until June 29 to trade in your current iPhone 4 or 4S in return for a $150 gift card, which could be put toward a $149.99 iPhone 5 with a new two-year contract. The trade-in credit can only be put toward the iPhone 5, leading to me wonder if Apple Inc. (NASDAQ:AAPL) is working behind the scenes. You would think that Best Buy Co., Inc. (NYSE:BBY) doesn’t necessarily care how you spend your $150 credit.
The bigger picture
Two possible scenarios may be playing out here. The first is that Apple Inc. (NASDAQ:AAPL) could be working behind the scenes to fight off the competition from the likes of Google Inc (NASDAQ:GOOG) Android and Samsung until it releases the iPhone 5S. If this were to be the case, Apple’s average selling price for iPhones would decline, gross profits would erode, and investors would not be happy campers. Additionally, it would signal that Apple Inc. (NASDAQ:AAPL) is either desperate or scared, two qualities which investors aren’t usually OK with.
The second could be that Best Buy and Wal-Mart are battling it out for foot traffic and the retailers themselves will be taking the hit. Back in January, Best Buy claimed it lost $65,000 in one day as a result of price matching against Wal-Mart’s iPhone 5 discount. Perhaps this is round two between these giants?
Unless we hear from the companies directly, there’s no way to know for sure how this story breaks down. With Apple’s earnings release less than a month away, I’m sure investors will get some color on the issue. In the meantime, Apple investors should keep a watchful eye for additional iPhone retailer discounts that may offer clues.
The article Trouble for the King of Cupertino? originally appeared on Fool.com and is written by Steve Heller.
Fool contributor Steve Heller owns shares of Apple and Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.
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