Firm reiterates claims of entry-level iPhone this spring
Although Apple has downplayed the possibility of a stripped-down iPhone, the Royal Bank of Canada is reiterating claims this week that the company is gearing up to announce two new versions of its touch-screen handset, including an entry-level model that lacks both 3G connectivity and an unlimited data plan.
The call came from analyst Mike Abramsky, who opened a research note to clients Tuesday by proclaiming that "checks reveal further entry-level iPhone details, including launches on existing carriers [in] June [or] July with a data plan, entry-level pricing and a lower subsidy."
Abramsky, who did not elaborate on his sources anywhere in the seven-page report, said the new handset would arrive in tandem with a "3G iPhone performance upgrade," or third-generation iPhone that would sport a new form factor, added features and outperform the existing model.
In a chart accompanying the report and attributed to RBC Capital Markets with the caption "best estimate at time of publication, specifications subject to change," the analyst constructed a side-by-side comparison of the two models he claims are on their way to market in the coming months.
New versions of the flagship iPhone 3G would supposedly fetch $199 and $299 for 16GB and 32GB models, respectively, after a $400 subsidy that would be absorbed by Apple's wireless carrier partners. Features such as UMTS/HSDPA connectivity, WiFi, Bluetooth, GPS and a two-megapixel camera would reportedly remain the standard, though the analyst claims the camera will be upgraded with video capabilities.
For screen real estate, Abramsky suggests Apple will stick to a 3.5-inch display but believes there's a possibility the company will employ a higher-density panel that ups the standard resolution to 720x480 from 480x320, a move that would somewhat mirror that of Japanese phone makers who've increasingly adopted 800x480 displays for their non-touchscreen handsets.
Meanwhile, the so-called "entry-level iPhone" would come wrapped in an enclosure similar but slightly thicker than the new iPhone 3G, adopting the same size screen, albeit at a resolution no greater than 480x320, according to the analyst. This model would forgo 3G connectivity for legacy EDGE support, lack GPS, and include a two-megapixel camera sans video, he said.
Apple would reportedly sell this model to carriers in an 8GB configuration for $299, which the carriers would then turn around and sell to consumers for $99 ($200 subsidy) alongside a "light" EDGE data plan with limited bandwidth for $15 per month.
Abramsky believes the move would be a play for unit volumes, something Apple chief operating officer Tim Cook categorically denied interest in pursuing during a recent conference call with analysts and members of the media.
"You know us, we're not going to play in the low-end voice phone business.Â*That's not who we are. That's not why we're here," he said. "We'll let somebody do that, our goal is not to be the unit share leader in the phone industry. It is to build the best phone."
Oddly, the RBC analyst acknowledged the poor economics of such a move in his report to clients, noting that an entry-level iPhone at lower gross profit margin to Apple would "appear less attractive" while simultaneously posing a threat of cannibalizing the sales of higher-end iPhones and iPods.
"We estimate the entry-level iPhone would cost $195-225 to manufacture, vs. the iPhone 3G at $300, assuming the exclusion of 3G (UMTS/HSDPA) chipset and royalties, exclusion of GPS, lower-resolution digital camera module, and component pricing declines on existing components (e.g. ARM processor, 8GB flash memory) along with assumed manufacturing economies of scale," he wrote.
Given these estimates, an entry-level iPhone would generate a 30 percent (or $90) profit margin compared to the iPhone 3G's 50 percent (or $300) margin, meaning Apple would need to sell three $99 iPhones to replicate the gross profit from one 3G iPhone, or 34 million units in total before 'breaking even' on the initiative. He believes 20 to 30 million of the devices will be sold during fiscal 2010.
Ironically, Abramsky followed his prediction of this margin-diluting strategy by maintaining his Underperform rating and $70 price target on shares of the Cupertino-based iPhone maker, saying he remains concerned of the "elevated risks to valuation from a possible growth and/or margin 'downshift'" for the company.
In an article titled "Mike AbramskyÂ?s bad AppleÂ*advice," published earlier this week, Fortune took the analyst to task for his most recent recommendations on the stock, noting that shares have climbed 27.5% in the past three weeks, meaning anyone who sold short the Monday after AbramskyÂ?s most recent downgrade "would have lost his or her shirt."
The call came from analyst Mike Abramsky, who opened a research note to clients Tuesday by proclaiming that "checks reveal further entry-level iPhone details, including launches on existing carriers [in] June [or] July with a data plan, entry-level pricing and a lower subsidy."
Abramsky, who did not elaborate on his sources anywhere in the seven-page report, said the new handset would arrive in tandem with a "3G iPhone performance upgrade," or third-generation iPhone that would sport a new form factor, added features and outperform the existing model.
In a chart accompanying the report and attributed to RBC Capital Markets with the caption "best estimate at time of publication, specifications subject to change," the analyst constructed a side-by-side comparison of the two models he claims are on their way to market in the coming months.
New versions of the flagship iPhone 3G would supposedly fetch $199 and $299 for 16GB and 32GB models, respectively, after a $400 subsidy that would be absorbed by Apple's wireless carrier partners. Features such as UMTS/HSDPA connectivity, WiFi, Bluetooth, GPS and a two-megapixel camera would reportedly remain the standard, though the analyst claims the camera will be upgraded with video capabilities.
For screen real estate, Abramsky suggests Apple will stick to a 3.5-inch display but believes there's a possibility the company will employ a higher-density panel that ups the standard resolution to 720x480 from 480x320, a move that would somewhat mirror that of Japanese phone makers who've increasingly adopted 800x480 displays for their non-touchscreen handsets.
Meanwhile, the so-called "entry-level iPhone" would come wrapped in an enclosure similar but slightly thicker than the new iPhone 3G, adopting the same size screen, albeit at a resolution no greater than 480x320, according to the analyst. This model would forgo 3G connectivity for legacy EDGE support, lack GPS, and include a two-megapixel camera sans video, he said.
Apple would reportedly sell this model to carriers in an 8GB configuration for $299, which the carriers would then turn around and sell to consumers for $99 ($200 subsidy) alongside a "light" EDGE data plan with limited bandwidth for $15 per month.
Abramsky believes the move would be a play for unit volumes, something Apple chief operating officer Tim Cook categorically denied interest in pursuing during a recent conference call with analysts and members of the media.
"You know us, we're not going to play in the low-end voice phone business.Â*That's not who we are. That's not why we're here," he said. "We'll let somebody do that, our goal is not to be the unit share leader in the phone industry. It is to build the best phone."
Oddly, the RBC analyst acknowledged the poor economics of such a move in his report to clients, noting that an entry-level iPhone at lower gross profit margin to Apple would "appear less attractive" while simultaneously posing a threat of cannibalizing the sales of higher-end iPhones and iPods.
"We estimate the entry-level iPhone would cost $195-225 to manufacture, vs. the iPhone 3G at $300, assuming the exclusion of 3G (UMTS/HSDPA) chipset and royalties, exclusion of GPS, lower-resolution digital camera module, and component pricing declines on existing components (e.g. ARM processor, 8GB flash memory) along with assumed manufacturing economies of scale," he wrote.
Given these estimates, an entry-level iPhone would generate a 30 percent (or $90) profit margin compared to the iPhone 3G's 50 percent (or $300) margin, meaning Apple would need to sell three $99 iPhones to replicate the gross profit from one 3G iPhone, or 34 million units in total before 'breaking even' on the initiative. He believes 20 to 30 million of the devices will be sold during fiscal 2010.
Ironically, Abramsky followed his prediction of this margin-diluting strategy by maintaining his Underperform rating and $70 price target on shares of the Cupertino-based iPhone maker, saying he remains concerned of the "elevated risks to valuation from a possible growth and/or margin 'downshift'" for the company.
In an article titled "Mike AbramskyÂ?s bad AppleÂ*advice," published earlier this week, Fortune took the analyst to task for his most recent recommendations on the stock, noting that shares have climbed 27.5% in the past three weeks, meaning anyone who sold short the Monday after AbramskyÂ?s most recent downgrade "would have lost his or her shirt."
Comments
What I suggest doesn't make sense because Apple always seems to stop selling the last years model when the new ones come out, but they did do what I'm suggesting with the white macbook for a while until it was recently upgraded.
- A new iPhone that's the same physical size but twice the resolution? WTF?
- A "lite" data plan? How does that make any sense?
This has to be confused reports of various things put together in the wrong way. On the face of it, some of this stuff is just ridiculous.a move that would somewhat mirror that of Japanese phone makers who've increasingly adopted 800x480 displays for their non-touchscreen handsets.
actually, if you take a look at the sharp 931SH for softbank (same carrier as iphone 3g here in japan), you will find it has a 3.8 inch hxga touchscreen - that?s 1024×480 pixels which equates to 298dpi. zang. and, again IS a touchscreen phone.
but, really, from my semi-professional opinion, this makes total sense as the way to go to "upgrade" the platform (iphone is certainly now a platform in the best sense of the word) - you can use the same apps, but due to increased gfx power, you can enjoy them at greater resolutions (with equal speed, and better texture density). kudos apple! and thanks! i am glad i waited this long!
So much of this makes no sense at all.
Why doesn't that make sense? A higher density screen on the iPhone would make it look amazing.
So much of this makes no sense at all.
I agree. The only reason I can see for Apple to get into the low margin telephony market would be to draw people towards the higher end models in the future. But that a low end iphone would have the same form factor as the present iPhone makes little sense. It would have to wow people with its usability and interface, and offer something beyond phone / ipod. Games is the obvious one with a separate category in the app store. Whatever it will be, if at all, it will be to bring in new users that are likely to upgrade in the future. If not, what's the point?
Why doesn't that make sense? A higher density screen on the iPhone would make it look amazing.
Well I was taking that as higher resolution not pixel density, but irrespective of the two items I picked out, I think my point remains. This is some seriously confusing sh*t. Sounds mangled to me.
Well I was taking that as higher resolution not pixel density, but irrespective of the two items I picked out, I think my point remains. This is some seriously confusing sh*t. Sounds mangled to me.
And 'higher resolution' equals larger display for you? Higher resolution means more pixels, if you keep the pixel size constant, you get a larger display, if you keep the display size constant, you get a higher density.
You make it sound as if higher resolution would be something else than higher pixel density, while in fact for something like an iPhone they most likely mean the same thing. Talk about mangled language.
RBC CEO even sits on Rim's board of directors!!
And 'higher resolution' equals larger display for you? Higher resolution means more pixels, if you keep the pixel size constant, you get a larger display, if you keep the display size constant, you get a higher density.
You make it sound as if higher resolution would be something else than higher pixel density, while in fact for something like an iPhone they most likely mean the same thing. Talk about mangled language.
Only a person who resembles a plastic container used for flushing certain parts of the female anatomy would criticise someone *after* they admitted to a mistake. You must be proud of yourself.
Also you missed the part about where I said that it wasn't really my main point anyway, but by all means reply again and we might be able to drive the thread completely off track if we are lucky.
Edit: I just double-checked and I am right anyway, so you got an apology for nothing. While "resolution" usually refers to pixel density in a technical sense, the common usage of "higher resolution" is indeed more pixels wide by more pixels tall. Since the description in the article talks about a phone and screen of the same *physical* size, and yet a higher resolution in terms of pixels, that would seem to indicate that the images on the screen would become smaller than they are now (smaller keyboard etc.).
So yes, I think that deserves a WTF? or two.
Why would Apple introduce a lower-quality product that will perform worse? I don't have an iPhone yet, but many reports (and lawsuits) about how the 3G doesn't live up to expectations.
Will consumers be happy with an iPhone and the expectations that come from it performing worse than current available products? I think not. Apple has been too careful in their history to avoid this.
I just hope this analyst and his firm are not looking to manipulate Apple stock. Anyone and their mother can speculate what new products will come out. If you are giving investment advice, how about some proof, proof and more proof.
All they have offered are words.
the so-called "entry-level iPhone" ... adopting the same size screen ... forgo 3G connectivity for legacy EDGE support, lack GPS, and include a two-megapixel camera sans video, he said.
Also known as "The Original iPhone".
Apple putting a new shine on an existing hardware configuration to sell the iPhone without a data plan is the most plausible rumor in here. It lets Apple maintain their margin on hardware that ostensibly wouldn't need a data-plan-level subsidy and it wouldn't fracture the app store or consumer expectations.
I can't imagine ATT would be too happy about it though. Unless they think they've pretty much hit the ceiling for switchers with the existing plan cost.
A straightforward performance bump for this year's 3G is also fairly reasonable/obvious. The rest of it is nonsense.
RBC is a major investor in RIM, in fact even a depression RBC cannot find any bad things to say about RIM. Meanwhile they bash apple every chance they get.
RBC CEO even sits on Rim's board of directors!!
Seems like a conflict: Currently she is Group Head, Strategy, Treasury & Corporate Services of RBC: http://www.rbc.com/newsroom/down2-stymiest.html
Just how close can you get?
RIM, RBC and Thomson Reuters to anchor a $150 million BlackBerry Partners Fund focused on investing in mobile applications and services http://www.rbc.com/newsroom/20080512mobile.html
But in all fairness, RBC did donate $10,000 to the Apple program… http://www.rbc.com/newsroom/pdf/20070301hockey-qc.pdf
All the early adopters 2 year contracts will be expiring and ATT will want renewals as well as upgrades...
Not sure about the iPhone lite, but the new version of the regular iPhone should have some fantastic new features...
All the early adopters 2 year contracts will be expiring and ATT will want renewals as well as upgrades...
All those early adopters probably already got a new two year contract when they bought the iPhone 3G for $199 in 2008. I'm hoping ATT offers the same deal again this June
To be an iphone it has to work as a iphone GUI wise but it does not need all features. Sp soemthing like the first generation iphone, with improvement in manufacturing can serve as a stepping stone into the iphone platform. There are ipods that are hardly high end and Apple make a lot of money on those as well.
iPhone core value
Phone, GUI, WiFI netsurfing apps
Expected extras
Camera, iPod, basic games (3G in Asia)
Extra features
3G, radio, GPS, video, 3D gaming
Apple has taken the lead with surfmobiles but they have both keep running ahead of the other ones as well as offer phones that are impressive but not at the (b)leading edge pricewise
Not sure about the iPhone lite, but the new version of the regular iPhone should have some fantastic new features...
All the early adopters 2 year contracts will be expiring and ATT will want renewals as well as upgrades...
A subscriber with an expired contract on the original iPhone should in theory have an unlocked phone or at least a phone that they can use to get a month-to-month and/or voice plan.