AT&T has revealed a new two year contract that features a free iPhone 3GS. The new contract will be launched on Best Buy on Monday according to Tech Buffalo.

The strategy does make a lot of sense, Apple wants to sell as many iPhone 3GS phones as possible before interest fades away altogether. The launch of the iPhone 5 in October will further dim the appeal of the iPhone 3GS. In fact, some reports suggest that Apple may stop the production of the Apple 3GS all together, shortly after the launch of the iPhone 5.
This is obvious for two reasons. First, getting rid of its stock of iPhone 3GS closing down the production line would let Apple focus more on the production of the iPhone 5 and divert valuable resources and energy away from a now-obsolete gadget. Secondly, Apple will find it more difficult to design a new iOS updates for older generation iPhones. New features would require better graphics and faster processors. Apple could resort to developing customized updates but then again this is costly and time-consuming, not to forget that Apple really does not make any money via software updates. The money is in the new hardware and that is why Apple is always keen on releasing new products as regularly as possible (its famous annual launches).

For now, the iPhone 3GS may actually be on safe footing because according to DigiTimes, the production of iPhone 3GS, iPhone 4 and iPhone 4 CDMA will exceed 20 million units. However, 4th quarter orders have been reduced to 8 million units. This might suggest that a major reduction might be the results of lower iPhone 3GS orders. The Best Buy promotion should provide a temporary boost in sales, enough perhaps to give the iPhone 3GS a dignified farewell.