Why Are Walmart Stores Slashing iPhone Prices?

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Wal-Mart (NYSE:WMT) is reportedly offering unheard-of discounts on the Apple (NASDAQ:AAPL) iPhone. The country’s largest retailer has cut prices of the phone with a two-year AT&T (NYSE:T) contract by as much as $74 at some locations.

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The 8-gigabyte iPhone 4 regularly costs $99 with a two-year contract, while the basic 16-gigabyte iPhone 4S retails for $199. Walmart stores usually offer an additional $11 discount on both. However, one store in Edmond, Oklahoma, is said to be offering the 8-gigabyte AT&T iPhone 4 for just $34, while selling the 16-gigabyte iPhone 4S for $114. Another store in Austin, Texas, is also offering the iPhone 4S for $114, though the price of the iPhone 4 was not lower than $88. The sale is not reflected on Walmart’s website.

Two-year contracts with Verizon (NYSE:VZ) or Sprint (NYSE:S) don’t seem to be part of the sale.

Apple sold 35.1 million iPhones in the first quarter, benefiting from growing international sales as well as continued subsidies provided by wireless carriers AT&T, Verizon, and Sprint. It was the best-selling smartphone for all three carriers from January to March.

Walmart does not form a very large part of Apple’s iPhone sales. A study found that Walmart, Target (NYSE:TGT), Radio Shack (NYSE:RSH), and Sam’s Club stores collectively account for just 3 percent of domestic iPhone sales. Best Buy (NYSE:BBY) alone makes up 13 percent.

Wal-Mart and Apple have also recently begun an experimental store-within-a-store concept.

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