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2009 - 2012Ecole d’ingénieurs (Dominante Ingénieur Finance : systèmes d’informations - finance) ESIGELEC (Ecole d’Ingénieurs Généraliste - Groupe des Mines http://www.esigelec.fr) Rouen – France Décembre12 - Mars13: Ingénieur Financier chez CNP Assurances – Place Catalogne, Paris Entité... More
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  • Does Apple Really Need A Cheap IPhone For Emerging Market ?

    Emerging market is obviously one of Apple's (AAPL) most important targets.

    Lot of Investors consider that the company may not be able to keep growing its market share in mobile device with its current strategy of pricing.

    Many reasons can let us believe that it's worth considering that opinion. To reach a reasonable conclusion we have to deal with the real face of Apple's competitors and most of all , the way people deal with luxury goods in emerging and developing markets.

    Luxury is by nature something that we acquire at a very expensive price without really needing it. Apple is expensive and not always bought because it's needed so we can consider it as a luxury brand.

    SKEPTICISM:

    Why? Because the mobile market seems to be saturated in "western" countries with a very aggressive competition from Android. And the average iPhone price seems to be very expensive for emerging market middle-class (for those who really have one).

    So this is maybe enough for lot of investors to lead us to a simple conclusion: iPhone will still have an interesting piece of the cake but will probably not gain market share in such conditions.

    The only way for lot of investors to counterbalance its new market share trendline is to start selling a cheap iPhone in emerging market such as China and India. Those same investors seem to know that this low price good is also going to shrink profits. So Apple will have to convince much more buyers than if it had kept its premium pricing.

    For those who think that a cheap iPhone is going the drive the share price up, they may face a very bad trip with Apple's stock

    Finally EPS will grow as hardly as if Apple didn't try to woo new consumers with a low-cost mobile.

    Reservation:

    Be careful! We have talked about competition. But does Apple's iPhone have competitors in emerging market or even in developed countries?

    The answer can be "YES" if you consider that Samsung, Sony, Nokia, Blackberry and others are making high-end mobile with a price similar to iPhone's or even more expensive.

    But Considering that Apple does not sale entry range mobile like Samsung, we can say that Apple's iPhone has no competitors. And that "iPhone" itself is a Luxury Brand with a single marketing model that grant him a particular consideration in emerging and developing market.

    Apple's Chance:

    Fortunately for Apple, in emerging and developing countries, buying a luxury good is not a matter of common sense.

    New middle-class want and have to show that they are not poor anymore. The poor want to pretend that they are rich. And the game is done for the luxury goods.

    In reality keeping an expensive device has never been so good for Apple in emerging market in which the size of the middle-class is going to increase anyway and cover the lack of a cheap iPhone market share that would in reality be nothing but a danger for the current iPhone market all else equal.

    The same phenomenon can be observed for luxury cars, watches and eyeglasses. No matter how expensive there are, in emerging market they will buy them because of the mentality.

    Therefore the fact that Apple needs a cheaper mobile phone has to be proven.

    Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: Holding AAPL's CFD for a very ridiculous amount

    Mar 28 11:57 AM | Link | Comment!
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