Latest 'iPhone nano' rumors ill-timed

[AppleInsider]

While checks within Apple's supply chain suggest the company is researching a low-end iPhone design, rumors that such a device will surface this year are overly optimistic, according to Lehman Brothers.

The equity research firm used a research note earlier this week to address a report by UK's Daily Mail, which asserted that a low-cost 'iPhone nano' is set to follow on the heels of the iPhone 3G with a release ahead of this year's holiday shopping season.

"While we believe Apple is working on a lower-end iPhone form factor, we do not think one will come until Spring 2009," analyst Ben Reitzes advised clients. He then outlined several reasons supporting his thesis.

First and foremost, Reitzes said, Apple is still struggling to reach a supply and demand balance on its latest handset, the iPhone 3G released just last month. With plans to expand availability of that handset to 50 more countries through the end of the calendar year, releasing a new iPhone model mid-way that process would only threaten to complicate matters.

Reitzes also recalls that Apple customers became furious last year when the company slashed the price of the original iPhone just months after launch, and therefore common sense would suggest that management would be looking to avoid a repeat episode of that scenario, he said.

"While we have picked up indications of a product like this in the supply chain, it doesn’t appear that the company has yet solidified the form factor, so it may be hard to get it finalized in time for the holidays," the analyst added.

In his report Monday, Reitzes also backed a recent report on heightened iPhone production. He said his own checks indicate that Apple will manufacture more than 3 million of the handsets this month alone, making his estimate of 3.8 million units for the September quarter seem overly conservative; Apple sold 1 million of the devices in the first three days alone.

"We believe that strong demand in the initial countries could make a rollout overseas take longer simply based on supply," he said. "We believe that initial demand overseas could be quite strong and estimate 8.3 million iPhones could be sold in [the fiscal first quarter of 2008] (December) with 24.2 million sold in fiscal 2009."

Reitzes reiterated his 'Overweight' on Apple shares with a $220 price target.

[ View this article at AppleInsider.com ]

[maleficent]

I mean, really?

It's the Daily Mail for a source and that pretty much sums it up right there.

[GQB]

I'm one of those who would actually love a stripped-down iPhone nano.
Just a damned phone-that-really-works, that does basic addressbook, and calls... easily sync'd, no direct data input.

Add a separate tablet for heavier lifting, and that docks into a home expansion system.
My gripe is not really the cost of the phone. The cost of the unit is fairly trivial compared to the cost of the contract. What I want is a cheap calling plan to go with it.

[fraklinc]

I think the iphone nano rumors are all bullshiet, come on most people are not even going for the cheap $199 8GB model, so why would they even try to make a even cheaper model than that?????

[monstrosity]

this really is a complete load of twaddle

Daily Mail? lol

[maxmann]

Originally Posted by fraklinc

I think the iphone nano rumors are all bullshiet, come on most people are not even going for the cheap $199 8GB model, so why would they even try to make a even cheaper model than that?????

but you are missing the simple fact that in a consumer electronics company, they will in the end be all things to ALL people.. a free phone with no subsidy that is available for the masses that has the basic functions of the iphone with a smaller screen and some minor limitations is just around the corner.. CE is about mass production like Nokia and Sony enjoys. It doesn't make sense at all for Apple to sit on their arse and wait for the others to offer competition for the iphone that is real... by ignoring the zillions of phones the competition is selling to the masses. Apple now has the name (see Sony 1980) the product (see Mercedes sells cheap cars too) and the infrastructure (see running on all cylinders with very few earth shattering mistakes) to support the next phase of a consumer electronics rampage..

It is amazing that the analzits are so far behind on a simple understanding of consumer electronics? Of course they will come out with another phone that kills the bottom feeders .. It is only about how much they will charge as a premium for the privilege of owning the cheaper phone (see Sony on all products from Halo of walkman in 80's)

[Booga]

come on most people are not even going for the cheap $199 8GB model, so why would they even try to make a even cheaper model than that?????

Because it could be much, much cheaper? An iPod Touch goes for $300 and an iPod Nano goes for $150. If you add $50 worth of "phone" to the Nano and subtract $200 in subsidies, you get a $0 phone that's an iPod. So yeah, this rumor sounds reasonable in its description of the product-- they'll sell a LOT-- but not in its timing.

The problem, as I see it, is that the iPhone Nano will likely not run apps from the App Store, and that and the iPhone 3G will be Apple's focus for the rest of the year. Jobs already said the MobileMe rollout was too much for Apple to handle at the same time-- they're not going to globally roll out an entirely new product line.

[a_greer]

Other than storage, and size, how would they differentiate it?

no exchange? no VPN? what else could they leave out without abandoning the consumer base?\

What I would expect to see is a keyboard and rollerball iphone ala blackberry 8xxx series. the BB8800 with the iphone osx would be the perfect phone (at least for me)

[GQB]

The 10 million $$ question is whether Apple will build a device that doesn't have a network interface (as opposed to internet connectivity.)
I think its entirely possible that they'll build a small-screen phone that can connect via wi-fi for MobileMe type syncing and updating, but doesn't have direct user interaction, such as keyboard, browser, etc.
I tend to think they won't build 'just a phone'. I do think they can build an internet-aware device that is a really usable phone (and of course, iPod), leverages internet connectivity, but doesn't do video and apps.

[christopher126]

Originally Posted by GQB

The 10 million $$ question is whether Apple will build a device that doesn't have a network interface (as opposed to internet connectivity.)
I think its entirely possible that they'll build a small-screen phone that can connect via wi-fi for MobileMe type syncing and updating, but doesn't have direct user interaction, such as keyboard, browser, etc.
I tend to think they won't build 'just a phone'. I do think they can build an internet-aware device that is a really usable phone (and of course, iPod), leverages internet connectivity, but doesn't do video and apps.

Agreed! Long after the iPod, Apple went after the flash MP3 players (low margin) and crushed them taking significant market share in very short order..... I would be surprised if Apple didn't eventually make an iPhone Nano with slimmed down features again to get the bottom of the market. It may very well include the App Store (for revenue) just as it would include iTunes/iPod again for the revenue stream.

My 23 year old daughter says her first gen iPhone has replaced 90% of her g4 12" PB. and I bet she is texting 90% and emailing 10%.

[iVlad]

I could really see smaller iPhone nano. Maybe smaller than regular iPhone and as thick as iPod Touch, with no Safari, Email, 3G or many Apps. I would just have Phone, iPod, and GPS. This will definatelly make it better than usual cheap phones.

Maybe 8GB model that will cost $150 to make but ATT will sell for $59

[pixelnyc]

whatever...i'm just glad they released a software update and made my iphone less laggy. good job apple, would have taken micro$oft a year and they probably would have added more bugs than they fixed.

[Xian Zhu Xuande]

Originally Posted by a_greer

What I would expect to see is a keyboard and rollerball iphone ala blackberry 8xxx series. the BB8800 with the iphone osx would be the perfect phone (at least for me)

Haha... they'll release that when they release a Windows-based laptop with a right and left click, three accessible panels beneath the laptop, and a wifi toggle button on the side.

[macslut]

It's easy to speculate that Apple just simply make a smaller, cheaper iPhone. This was especially true when the phone first came out and was much more expensive.

The problem is, what do you remove or reduce in the iPhone that significantly reduces the cost? You need to reduce the price considerably to put it in a different product class.

The iPod Nano is a $100 class drop from the iPod Classic, but that's the one time charge. The sales price of the iPhone is a small percentage of what one ends up paying for the iPhone. Thus a price difference of $100 versus $200 for the iPhone isn't as significant.

The iPhone Nano would need to cut $200, with the remaining $200 still subsidized, thus being free with contract.

The problem is that it's hard to come up with a way that the iPhone Nano could be reduced in cost...especially in such a way that AT&T (or others) would want to subsidize it.

Some people are saying things like "take away GPS, email, Safari", great, but email and Safari are just software...and AT&T won't be willing to subsidize iPhones without the premium subscription plans that include data. Even GPS falls somewhat into this category as you're only saving the cost of the receiver (which is cheap).

Likewise, producing an iPhone that doesn't run apps from the iTunes store means not receiving 30% of app sales. That doesn't help.

Then there's the whole "make it smaller" thing. That worked with the iPod since it meant going to flash as opposed to the larger space required by the hard drive...and lower power requirements meant a smaller battery. You can't do either of these two things with the iPhone.

You could reduce the screen size, but that still doesn't cut the costs enough to where it needs to be, and since the screen is thin, it wouldn't change the footprint of the iPhone.

[merdhead]

Originally Posted by christopher126

Agreed! Long after the iPod, Apple went after the flash MP3 players (low margin) and crushed them taking significant market share in very short order..... I would be surprised if Apple didn't eventually make an iPhone Nano with slimmed down features again to get the bottom of the market. It may very well include the App Store (for revenue) just as it would include iTunes/iPod again for the revenue stream.

My 23 year old daughter says her first gen iPhone has replaced 90% of her g4 12" PB. and I bet she is texting 90% and emailing 10%.

That's very interesting.. about your 23yo daughter... but, er, back to the point, I think anything would have trouble competing against the iPhone, including other phones from Apple. Why wouldn't you go the whole hog, the biggest difference in "price" can only be $200, and when you end up paying so much per month it doesn't mean much. It would therefore require it's own "cheap" plans, which then makes it less of a sell to phone companies because they will make less and they figure cannibalisation of their existing sales.

I don't see it.

[Walter Slocombe]

Originally Posted by AppleInsider

"While we have picked up indications of a product like this in the supply chain, it doesn’t appear that the company has yet solidified the form factor, so it may be hard to get it finalized in time for the holidays," the analyst added.

is it me or is the analyst on crack?

how can it exist "in the supply chain" when its form factor hasn't been finalized?

I mean, to be in the supply chain, it must first be be a finalized product..?? mustn't it?

[bobmarleypeople]

I'm gonna have a little say here. I'm not confirming anything, but just stating the facts.

I live in the UK. (that's a fact)

The mobile phone company "O2" (subscript 2 similar to Oxygen) is the sole seller of the iPhone (in addition to the Carphone Warehouse who still sell it under O2. And yes, this is a fact...ok I'll stop this now)

O2 announced a while before the iPhone's release that a "Pay As You Go" model is coming later in the year. That bit is quoted as best as I can from memory when I visited their site a few weeks before launch. The bit that interests me (and hopefully you) is the fact that they said "MODEL" and not just "iPhone 3G on Pay&Go".

They have since then changed the site to say "Soon you will be able to get all the benefits of the iPhone 3G, but on Pay&Go". So this could either mean that they said something too early, or that the 3G iPhone really will be available for sale without a contract. HOWEVER, time for some more facts....

The original iPhone was very expensive in all countries because the carriers (i.e. O2 and AT+T) weren't going to subsidise the phones. The iPhone 3G is cheaper than the original because the carriers are offering subsidies because they know how successful it will be and how much money they'll rake in, paying back the subsidy on the handsets. Handsets on Pay&Go phones, however, are NOT subsidised because the customer could leave the carrier at any time to go to another one. If the current iPhone 3G was released as Pay&Go, it would be very VERY expensive. i.e. more expensive than the original iPhone and possibly more expensive than those who don't qualify for the subsidies AT+T and O2 are offering.

Putting all this together would mean that, unless ATT and O2 are going to hope and pray that the immense popularity of the iPhone will mean that they can release the handset at unsubsidised price, there may be another iPhone in the works (or they have a special plan to keep customers on their network).

Perhaps you're now thinking "what about the O2 website? They said that the Pay&Go phone would have all the benefits of the iPhone 3G" well then...if the iPhone Nano rumours are true, then we can expect it to have 3G and Wi-Fi as well as a similar (not necessarily the same) touch screen interface as the iPhone 3G. I doubt apps will be available for it though because it's bound to have a smaller screen at the very least and Apple will want people to go for the main iPhone so they get more monies. The storage capacity is likely to be smaller too which is a shame cos the iPhone's storage is pretty rubbish as it is, but it's bound to happen should a new phone be released.

OK I've been typing a lot now so here's the moment you've all been waiting for:

tl;dr:
1) O2 say Pay&Go phone coming THIS YEAR.
2) iPhone 3G likely to be too expensive to release as Pay&Go.
3) 3G iPhone Nano possibility increases.
4) ?????????
5) PROFIT!!!

[GregAlexander]

Originally Posted by GQB

My gripe is not really the cost of the phone. The cost of the unit is fairly trivial compared to the cost of the contract. What I want is a cheap calling plan to go with it.

They're tied together pretty intimately. I mean - the iPhone 8GB seems to cost $600, and the 16GB is $700. In the US, you are sold these phones (on a choice of high end plans) subsidised to $200 and $300. Different countries package the phone in different ways, with a base price of the iPhone about 10% higher than US.

If you want a low end/cheap calling plan, AT&T need to charge the full price of the phone as it won't make its money back on the plan.

Of course - if Apple made a cheaper iPhone Nano they could package it more cheaply overall. For example, it might only be slightly cheaper than the current phone but be available on much cheaper plans.

Originally Posted by GQB

I'm one of those who would actually love a stripped-down iPhone nano.
Just a damned phone-that-really-works, that does basic addressbook, and calls... easily sync'd, no direct data input.

And you're even removing the iPod aspects from the phone... they could perhaps build iPod Nano functionality in.

[wizard69]

First; off people Apple is a business and as such they can not survive in the cell market place with just one model of cell phone. Thus they have no choice but to expand the number of models they offer.

Second; I can't see how the arrival of a new iPhone model to go along with the current model would anger or impact anybody with a reasonable amount of gray matter between their ears. Does any body here rationally expect Apple to only have one model/design cell phone available at anyone time? The fact is that iPhone fills a specific niche and does so reasonably well. The reality is though that not everybody, that is potential customers, fits that model well at all.

Third; if one looks back to the older iPod Nano one would see an almost ideal form factor for a light weight cell phone. A month or two ago I thought that for practical reasons it would be Edge/3G only but even there I see potential in a lot of new chips becoming available. It may very well be possible for Apple to stuff Bluetooth, WiFi and cellular into a cell phone not much bigger that the Nano of old. What is possible circuitry wise in a cell phone is advancing at a very rapid rate. Even if this generation is a pass at WiFi it may very well be possible to make a lot of people happy with a Edge/3G iPhone. The fact remains that my biggest usage of networking support happens on 3G on my new 3G iPhone.

It is a mistake to believe that Apple would copy the user interface verbatim on a Nano sized iPhone. Whatever they do will still have to be functional in a human factors way. Apple is good at this so one should at least be open to a different sort of interface on an iPhone Nano. Apple has plenty of already patented IP that addresses a multitude of different possible user interfaces on an IPhone Nano.

By definition the smaller screen of an iPod Nano would place the unit in a different market category. Thus the hardware will not be competing with the larger screened iPhone for any significant market.

I could ramble on but I' rather shocked at what the analyst has written and more so some of the responses in this thread. I just can't imagine Apple getting to worked up over a few potential cry babies when there is a huge potential customer base that they will never reach with the current iPhone.

Dave

[wwrightstufff]

Originally Posted by GQB

The 10 million $$ question is whether Apple will build a device that doesn't have a network interface (as opposed to internet connectivity.)
I think its entirely possible that they'll build a small-screen phone that can connect via wi-fi for MobileMe type syncing and updating, but doesn't have direct user interaction, such as keyboard, browser, etc.
I tend to think they won't build 'just a phone'. I do think they can build an internet-aware device that is a really usable phone (and of course, iPod), leverages internet connectivity, but doesn't do video and apps.

Apple is not in the low end phone business if they do come out with a smaller phone it will run the same os and have the same features, connecting you to the app store and the their music store

[GregAlexander]

Originally Posted by wwrightstufff

Apple is not in the low end phone business if they do come out with a smaller phone it will run the same os and have the same features, connecting you to the app store and the their music store

That is entirely possible.

I wouldn't be so confident though. People didn't expect iPod Nanos, let alone iPod Shuffles.

[wwrightstufff]

Originally Posted by GregAlexander

That is entirely possible.

I wouldn't be so confident though. People didn't expect iPod Nanos, let alone iPod Shuffles.

Im sure apple would love to make a smaller phone, the problem is they don't want the usability to change. Im sure after they were done building the iPhone 3g they had a meeting and said how can we create a new phone half the size and still use the same screen and features. when they figure that out then they will introduce another variation of the iPhone

[bsenka]

An iPhone Nano is much closer to what I would want. The same form factor as the second gen iPod Nano, the functions of the current nano, plus phone. No touch screen, no wifi, no app store, nothing else. Just iPod plus phone.