07-25-2013, 10:26 AM
Maybe the construction will be altered but will the "cheap" phone actually be "cheap" ?
How cheap can Apple go with the iPhone?
6:00 AM ET, 07/25/2013 - MarketWatch Databased News
SAN FRANCISCO (MarketWatch) -- Apple Inc. investors are once again betting on a spate of hopes and rumors and reading into the tea leaves from Tuesday's earnings call.
One product in particular is being banked upon. Wall Street is widely expecting that Apple's autumn iPhone launch will include a much cheaper iPhone, one that will help it gain share in the faster growing emerging markets outside the U.S., where consumers don't typically have the subsidies from the carriers to help offset the costs.
Investors have been clamoring for Apple to respond to the competitive threat of lower-cost smartphones running Google Inc.'s Android operating system, arguing that sales of higher-end smartphones have reached a saturation point. Chief Executive Tim Cook isn't buying this theory.
"I don't subscribe to the common view that the higher-end, if you will, [of] the smartphone market has hit its peak," Cook told analysts on Tuesday. "I don't believe that, but we'll see, and we'll report our results as we go along."
Still, on Tuesday, the company's slightly better-than-expected results were in part due to glowing sales of its iPhone 4 and 4S, which at three years and two years old, respectively, might be among Apple's biggest selling iPhone models yet. In the U.S., many carriers are now giving away the older iPhone 4s and 4Ses, but outside the U.S., the iPhone 4 still costs a pretty penny. In the fiscal third quarter, though, price cuts helped the iPhone 4 models fare well outside the U.S.
Cook told analysts on Tuesday that the iPhone 4 helped Apple gain share in markets like India, Turkey, Poland, and the Philippines, with some recent price cuts. Company executives would not comment on the specific timing of any planned iPhone introductions for the rest of the year, except to say they would take place in the fall.
Some investors may be wondering, though, if the older, cheaper iPhone 4 is doing so well outside the U.S, why does Apple still need to launch a low-cost iPhone? One data point appears to prove that even with price cuts, the iPhone 4 and 4S is not so cheap outside the U.S.
Steve Milunovich, an analyst with UBS, estimated that the average selling price of the 4 and the 4S was about $581.
"Some gains were in emerging markets thanks to the 4/4S, which reduced the ASP [average selling price] from $613 last quarter to $581 even before the mid-range phone ships," Milunovich wrote in a note on Wednesday.
The argument is that if Apple wants to make even further inroads outside the U.S., it still needs to offer an even lower-cost iPhone.
In the first quarter of 2013, according to market research firm Gartner Inc. Samsung Electronics Co. Ltd again led the smartphone market with 30.8% of the world market. Apple was No. 2 with 18.2%, down from 22.5% of the market in the year-ago quarter.
Some analysts predict that in order to cut prices further, it will make an iPhone 5 with a casing of plastic instead of glass in order to get the retail price down, much like older versions of the iPhone.
Citigroup analyst Kevin Chang, who follows the supply chain, wrote in a note last week that he believes the low-cost iPhone will be plastic with the same display, touch screen, processor and memory content. However, he also noted that the low-cost iPhone is "unlikely to be cheap," estimating the cost difference between the company's next iPhone, which many are calling the iPhone 5S, and the cheap iPhone to be no more than $50.
"We estimate wholesale price of low-cost iPhone could be around $380 to $400, while the retail price is likely to be around $450," Chang wrote. At those prices, Apple should be able to keep its gross margins in the range of 36%-37% of revenue.
Apple also faces a quandary with its brand, which is known for higher-end products. But as the smartphone market continues to see saturation, Apple is going to be walking the fine line of staying at the high end but also creating a lower-cost model without making it seem cheap.
Apple would not comment on its new products in development, except to say that the company is "very hard at work on some amazing new products that we will introduce in the fall and across 2014," Chief Financial Officer Peter Oppenheimer said on the earnings call.
In the meantime, as is typical with the secretive company, investors will just keep on speculating.
How cheap can Apple go with the iPhone?
6:00 AM ET, 07/25/2013 - MarketWatch Databased News
SAN FRANCISCO (MarketWatch) -- Apple Inc. investors are once again betting on a spate of hopes and rumors and reading into the tea leaves from Tuesday's earnings call.
One product in particular is being banked upon. Wall Street is widely expecting that Apple's autumn iPhone launch will include a much cheaper iPhone, one that will help it gain share in the faster growing emerging markets outside the U.S., where consumers don't typically have the subsidies from the carriers to help offset the costs.
Investors have been clamoring for Apple to respond to the competitive threat of lower-cost smartphones running Google Inc.'s Android operating system, arguing that sales of higher-end smartphones have reached a saturation point. Chief Executive Tim Cook isn't buying this theory.
"I don't subscribe to the common view that the higher-end, if you will, [of] the smartphone market has hit its peak," Cook told analysts on Tuesday. "I don't believe that, but we'll see, and we'll report our results as we go along."
Still, on Tuesday, the company's slightly better-than-expected results were in part due to glowing sales of its iPhone 4 and 4S, which at three years and two years old, respectively, might be among Apple's biggest selling iPhone models yet. In the U.S., many carriers are now giving away the older iPhone 4s and 4Ses, but outside the U.S., the iPhone 4 still costs a pretty penny. In the fiscal third quarter, though, price cuts helped the iPhone 4 models fare well outside the U.S.
Cook told analysts on Tuesday that the iPhone 4 helped Apple gain share in markets like India, Turkey, Poland, and the Philippines, with some recent price cuts. Company executives would not comment on the specific timing of any planned iPhone introductions for the rest of the year, except to say they would take place in the fall.
Some investors may be wondering, though, if the older, cheaper iPhone 4 is doing so well outside the U.S, why does Apple still need to launch a low-cost iPhone? One data point appears to prove that even with price cuts, the iPhone 4 and 4S is not so cheap outside the U.S.
Steve Milunovich, an analyst with UBS, estimated that the average selling price of the 4 and the 4S was about $581.
"Some gains were in emerging markets thanks to the 4/4S, which reduced the ASP [average selling price] from $613 last quarter to $581 even before the mid-range phone ships," Milunovich wrote in a note on Wednesday.
The argument is that if Apple wants to make even further inroads outside the U.S., it still needs to offer an even lower-cost iPhone.
In the first quarter of 2013, according to market research firm Gartner Inc. Samsung Electronics Co. Ltd again led the smartphone market with 30.8% of the world market. Apple was No. 2 with 18.2%, down from 22.5% of the market in the year-ago quarter.
Some analysts predict that in order to cut prices further, it will make an iPhone 5 with a casing of plastic instead of glass in order to get the retail price down, much like older versions of the iPhone.
Citigroup analyst Kevin Chang, who follows the supply chain, wrote in a note last week that he believes the low-cost iPhone will be plastic with the same display, touch screen, processor and memory content. However, he also noted that the low-cost iPhone is "unlikely to be cheap," estimating the cost difference between the company's next iPhone, which many are calling the iPhone 5S, and the cheap iPhone to be no more than $50.
"We estimate
Apple also faces a quandary with its brand, which is known for higher-end products. But as the smartphone market continues to see saturation, Apple is going to be walking the fine line of staying at the high end but also creating a lower-cost model without making it seem cheap.
Apple would not comment on its new products in development, except to say that the company is "very hard at work on some amazing new products that we will introduce in the fall and across 2014," Chief Financial Officer Peter Oppenheimer said on the earnings call.
In the meantime, as is typical with the secretive company, investors will just keep on speculating.
07-25-2013, 03:49 PM
The ability to maintain margins is Apple's primary advantage in the marketplace. Holding price while agressively reducing manufacturing price and maintaining quality and market share is Apple's main business advantage. As discussed before, a rampant quality drop would result in brand erosion. The Apple brand, and it's meaning for quality, performance, and "Just working" is Apple's primary asset.
I can guarantee they will be as careful as possible with any change.
I can guarantee they will be as careful as possible with any change.