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Apple (AAPL) is working on a cheaper iPhone that could launch later this year, the WSJ reports....
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Tuesday, January 8, 5:13 PM ETApple (AAPL) is working on a cheaper iPhone that could launch later this year, the WSJ reports. One source says the device could resemble the regular iPhone, but "with a different, less-expensive body." The cheapest iPhone currently sold (the 8GB iPhone 4) goes for $450 unlocked, putting it out of the reach of many emerging markets buyers, as well as some prepaid buyers in developed markets. The fact low-end Android phones sell for much less (sometimes less than $150 unlocked) has done wonders for Android's international share.
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APPL offered their bread and butter iPod at all price points to compete in the MP3 player market.
Even the MacBook Pro which used to retail at astronomical levels have eventually come down to competitive price point.
The cheap iPhone will be specced like the iPhone 3G(maybe 3GS) and could retail for $249 unlocked. Still a higher price than the competing Andriod. Just like the iPad mini.
Customers who want the latest and greatest will still get the iPhone 5. This is definately not catered to that user market. People who go out to buy a BMW don't come home with a Corolla.
This from StreetInsider today (1/8/13):
" Earlier reports had Apple, Inc. (Nasdaq: AAPL) working on a lower-cost iPhone to tap further into emerging markets. The WSJ affirmed speculation with its own headlines after the close of the market. Despite Apple still having strong sales with its bread-and-butter offerings, the company may be looking to make adjustments as it aims to keep growth on track. Whether margins on the rumored iPhones end up being comparable to current levels is pure speculation; there are plenty of components out on the market that would do a good job of mimicking the Apple experience, but Apple ultimately has to decide if sacrificing quality is in the game plan."
RIMM is on a fast train to nowhere and Microsoft has a very large mountain to climb (I don't think Ballmer is up for the challenge). .
which is why AAPL Tim Cook is in China now to negotiate with China Mobile (CHL)
Question - is it better to have the largest unit market share or the largest cash profit margin dollars?
Where is the 90% decline in profits at Apple that css speaks of?
The stock is being manipulated, big !
Proof: In Oct, 2012 on one day, a billion dollars worth of Apple stock was bought and then sold by one firm, while almost half that amount was shorted by the same people through an "unnamed" firm.
Where was the money behind these crooked deals? Who in authority signed off on these transactions?
Now a complete cover-up and news blackout has occurred.
See Google, "David Miller, Rochdale, unnamed firm".
The whole story needs exposure, and the illegal profits earned should be returned to the innocent investors like me, who lost big on stop loss.
Manipulations like this need to be rooted out and the top perpetrators indicted (not just the "traders").
No wonder we lose faith in the equities market !
Apple would do just fine if the crooks kept away from it.
As I've said before, it was hype that took this stock to $700, it will be hype that takes it down $400. Its true value lies somewhere in between.
If Apple produces a competitive full-featured phone at a lower price, they canabalize their own sales and say bye-bye to all those fat margins Apple fans always cite. And, if they make a dumbed-down version at a lower price, they'll be laughed at and won't sell any.
Take your pick.
This enables Apple to preserve its margins, preserve its brand, preserve its focus and go after the low end with a management team who's life depends on succeeding in that market.
Case in point iPod Shuffle and Mac-Mini, both of these are seriously low-end and target the entry level consumer. Both are seriously under spec'd but reliable. And, both have led to a halo effect w/r to consumers purchasing other devices.
I don't know, sounds like something Jobs would do! Three cheers to Tim Cook if this is true.
However, the huge difference between such an alleged low-end iPhone and the iPod Shuffle/Mac Mini is that such a phone has the potential to lead to much larger profits from the international consumers. Hmmm?
Almost all car makers have their mini's & make a lot of money with that.
Apple in not obliged to sell it at 150$. Ipad mini at 329 is selling much better than Nexus7 at 249. People pay the prime for Apple.
An iphone mini at 250 to 350 $ can also take a specific market. Many people like to buy Apple & enjoy the ecosystem but dont have the use for a full future iphone.
A "cheaper" iphone for a different market can still be "premium". it can be the most expensive phone in the category so that people still have to stretch their smartphone budget to buy it. It will be the "premium" phone in that lower category that will sell for more than the competition, while still being affordable.
BMW has the 3 series, 5 series, 7 series, Mercedes offers C, E and S class. The point of the entry level series is to offer someone willing to stretch from a loaded "non premium" brand (someone willing to pay $35k for loaded Accord, for example). those people keep buying the brand, and move up as they do better.
Apple should strive to do this. If managed right, and it will be (it won't be called iCheap, I assure you), there is no reason that this should hurt its image, anymore than BMW is hurt for offering 3 model lines that differ dramatically in price. if done right, Apple can see its products and ecosystem open to literally billions of people. Also, in Europe Mercedes and BMW offer cheaper, smaller models than are offered here, all while maintaingn a premium image both in Europe and in the U.S., so it has been pulled off sucesfully before.
Having a differnt priced iPhone is consistent with Apple's strategy. If this rumor proves true, and it's just a rumor, Apple should strive to introduce high margin producs that redefine the category, even if that category is at lower price point.
And think about this, most Apple products come in different specs at differnet prices now anyway. Macbooks for example come in differnet sizes, with Retina screen and without, with normal hardrive, all solid state, or fusion, and there's a dramatic difference in pricing from the lowest to highest spec'd models. Ditto for iMacs. While the analogy is not perfect because even an entry level macbook costs more than most other laptops, my point is that a "cheaper" iPhone for developing markets should still be premium.
while there are risks, the rewards could be huge, and there is nothing inherently wrong in a premium brand offering having different levels of premium.
A cheap phone is the oposite of what apple needs to release. What they should do is release a new iphone next fall with features (both software/hardware) that will blow the competition out of the water. The only thing that has hurt apple thus far is that the competition tech has ALMOST caught up and in some cases they have developed slightly better hardware (screens). In my opinion i expect the next iphone to incorporate some heavy duty improvements that will once again put them ahead of the pact. Apple also needs to push some new product pipelines. Yes, you've probably already heard about it.....a TV. But not just any TV a TV with 4K resolution, a computer, media player, iphone/ipad streamer for games/interface, face time and siri all integrated into one box.. With that said apple will verge into their primary competitions market with a new and improved product. The only thing that may be unpractable is the 4K resolution in a 50inch screen. A 2k resolution in a 42inch display is definatley in reach at a very affordable price. Other than the screen itself they've already developed everything else. How awesome would it be to be able to talk to you TV and get real time updates on games while watching sunday football or march madness. What about surfing the web while watching a game with picture in picture? This is where apple needs to head next. Building cheaper products is not the right move.
What goes up must come down.
Side note: it's truly amazing, and quite entertaining, to see the oracle's of Apple's future. Apple should just hire all those who post negative comments on this site and Apple would shoot back up to $700/share due to a far superior strategy.
Co Sounds desperate.
Jobs would have created a new product and new market instead of playing limbo with the competition.
AAPL 300s this year.
All those that want to buy an Apple (Students, Low-Income, Developing Countries - about 80% of the World) will now be able to do so.
The people who buy the preium Apple iPhone will never change. Would a BMW 7-series driver ever buy a BMW 1-series? No of course not.
Apple will grow market share, and as these people/countries develop they will migrate onto the premium products.
They will also add revenue from day one throught the App Store.
What many fail to understand is when Apple sell an iPhone/iPad they also calculate the expected revenue from the ecosystem as well, which as we know has zero distribution costs. Samsung without any ecosystem, has to just keep selling hardware a lower and lower prices to compete with Apple.
This is very very bullish news for Apple investors indeed.
That's why I think, Apple needs to tap every market they can, as long as they keep making high quality stuff
Considering that AAPL controls 60% of the smartphone profit with less than 20% share of the smartphone market suggests that AAPL being worried about the bottom end of the market is ridiculous, at best.
Let the small player live , APPLE cannot and should not try to be the sole provider of smartphones. Just be different and UPSCALE.
There are markets of literally billions of people that Apple can access by providing a less expensive ('cheaper') model. It doesn't mean it has to be any lower quality than what Apple currently does. They aim to be the best in every market they are in - being the best in a lower cost market doesn't lower the value of their brand.
I think it's funny that people assume Apple is simply going to abandon the principles that have made them one of the most successful companies in history. "Oh noes!! Steve Jobs is dead! Quick, let's all panic and run the company into the ground!!"
Of course. AAPL is in so much trouble that it will start trading at 2x cash and 6x earnings.
Run for the hills, everybody.
Apple has always adopted the "Mercedes" approach to products, preferring to introduce the most elegant and expensive models at high margins. This "skim-the-cream" approach to the market is especially effective when one has a technology leadership position, effective marketing and limited or no competition. But, it only works as long as those ingredients ca be maintained.
The original Mac vs. PC demonstrates what happens in this model over time. Eventually, volume is ceded to competitors, and they, based on higher volumes, are able to offer competitive products at lower cost. Then, the choice is either to maintain margins and settle for a smaller sliver of volume, but only if a truly elite product can be maintained, or to cut prices and battle it out for greater volume against the emergent competitors.
As regards the global smartphone market, Apple has already ceded the volume to Android, which now outsells iOS by a margin of over 4:1, and is expanding. However, in the smartphome business it isn't only hardware sales and margins that count, but the ongoing business of monetizing software sales from the "installed base." Apple has been especially effective, so far, in monetizing its user base, more so than Android. However, that advantage is going to be negatively impacted if Android increasingly sucks all the air out of the room by outselling Apple significantly in hardware. Apple realizes this, and that's why they're pondering the dilemma of the margin-vs-volume conundrum.
In the long run, it's always advantageous to be the high-volume, high-market-share producer because it affords so much more flexibility in spreading costs and creating inefficiencies. The lower volume producers have a much more difficult, mostly impossible, time generating a profitable model at the higher-volume price points.
So, the choice for Apple is a bit binary. They can battle for volume growth to maximize future software sales, or they can make elite products and settle for lower volumes. The ability to do both effectively is rare, and sometimes even the attempt compromises both efforts. It would seem advisable, given Apple's present status and competitive position, that Apple take the high road because there's nothing in their history or character that suggests they can be effective in the low-cost trenches.