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Electronics chain Best Buy Inc. said Tuesday it will offer refurbished iPhone 3Gs at a steep discount.

The phones, made by Apple Inc., start at $149 for the 8-gigabyte version and $249 for 16 gigabytes, compared with $199 and $299, respectively, for new iPhones sold at Best Buy Mobile stores. A two-year service contract with AT&T Inc. is required.

The refurbished phones will be available at 350 locations initially, then at all U.S. locations offering AT&T by the end of January, the consumer electronics chain said. The phones have been returned by customers during the 30-day trial period and restored to "like-new" condition, Best Buy said.

The iPhone 3G connects to cellular providers' speedier third-generation networks and delivers faster Web surfing and online video than the original model.

For Apple, the announcement marks another step away from tightly controlling retail sales of its products. Best Buy was the first independent retailer to sell iPhones. And Wal-Mart Stores Inc. said last month it would also sell the iPhone with a $2 mark down.

Best Buy shares jumped 94 cents, or 3 percent, 30.94 in midday trading.

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Electronics retailer Best Buy Co. says it is sharply cutting its fiscal 2009 earnings outlook below analyst estimates amid what the company called the toughest retail environment it has ever seen.

Richfield, Minn.-based Best Buy (nyse: BBY - news - people ) expects earnings per share between $2.30 and $2.90 for the fiscal year ending in February, down from a prior estimate between $3.25 and $3.40 per share.

The retailer forecast revenue between $43.7 billion and $45.4 billion, as well as 1 percent decline in same-store sales, or sales at stores open at least 14 months.

Analysts expect earnings of $3.02 per share and sales of $46.23 billion for fiscal 2009, according to a Thomson Reuters survey.

Best Buy's same-store sales dropped 7.6 percent in October. Same-store sales are a closely watched performance indicator because they measures sales at existing locations rather than newly opened ones.

Chief Executive Brad Anderson said "seismic" changes in consumer behavior have created "the most difficult climate" ever seen by the company.