iPhone gets cheaper ahead of holiday season: CIBC warns that sales may be slowing

Apple Inc. slashed the price of its 8GB iPhone by one-third and, separately, the company launched a Wi-Fi storefront hawking full-track tunes and albums for the device.
The company said it lowered the price of the 8 GB iPhone from $600 to $400, and discontinued production of the 4 GB model. Apple said it will sell the 4 GB model while supplies last. And Apple introduced the iPod Touch, a Wi-Fi-enabled handset that mirrors the iPhone but doesn’t offer cellular connectivity.
The drastic price-cutting suggests a dramatic lull following the initial surge of iPhone sales during the summer, according to CIBC World Markets. And it may portend a 3G-enabled iPhone as early as November, months ahead of most analysts’ projections.
“We see the quick price cut (after just two months) as unusual for an Apple product, although not atypical for a handset,” the firm wrote in a research note. “With many handset vendors introducing high-end touchscreen models in the fourth quarter, most of which include 3G, competition will be intense.”
However, other analyst firms, including iSuppli Corp., have published numbers that show the iPhone selling well.
Perhaps more importantly, Apple added wireless download functionality to the much-hyped iPhone with an online storefront allowing users to browse, preview and purchase songs from the iPhone or iPod Touch. The Wi-Fi offering matches the standard iTunes price of 99-cent downloads-a key factor in the nascent mobile music space-and downloaded tunes will automatically synch to existing iTunes libraries when the portable devices are connected to a PC or Mac.
Users will also be able to create custom, 30-second ringtones from previously purchased clips for an additional 99 cents. While that price is substantially lower than most on-deck ringtones, several applications available online and at retail storefronts help create ringtones from existing digital music libraries.
While the Wi-Fi functionality of iTunes is sure to increase the appeal of Apple’s connectable handsets, the move comes as the full-track download space is becoming increasingly crowded. Nokia Corp. last week said it will roll out a mobile music service in Asian and European markets, and Verizon Wireless is teaming with MTV Networks and RealNetworks Inc. to add over-the-air downloads to Real’s Rhapsody service.