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Comments from Apple exec Tim Cook hint at lower-priced iPhone options

post #1 of 97
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New comments from Apple Chief Operating Officer Tim Cook that Apple doesn't want its products to be "just for the rich" have fueled speculation that the company is interested in offering a cheaper iPhone.

Bernstein Research analyst Toni Sacconaghi met last week with Cook, Apple Chief Financial Officer Peter Oppenheimer, and Vice President of Online Services Eddy Cue. According to Forbes, the analyst came away with the impression that Apple is "likely to develop lower priced offerings" in its handset business.

Cook also reportedly said that Apple is planning "clever things" to compete in the prepaid handset market. He also said that Apple is "not ceding any market," and the company doesn't want its products to be "just for the rich."

Cook's comments, and the analyst's interpretations, come soon after two prominent publications claimed that Apple is working on a new, smaller, $200 contract-free iPhone that it could sell directly to customers and bypass wireless carrier contracts. Both Bloomberg and The Wall Street Journal said that Apple's alleged plans were in an effort to compete with Google's growing Android mobile platform.

But another mainstream publication, The New York Times, rebuffed those two reports only days later, and said that Apple is not developing a smaller handset. However, it was reported by the Times that Apple has explored opportunities to create a less expensive iPhone.

In his meeting with Sacconaghi, cook reportedly referred to the iPhone as "the mother of all halos," as the handset has expanded sales of Apple's other devices, particularly in emerging markets. Apple has long referred to sales of the iPod -- and later iPhone -- as having a "halo effect" that drives sales of Macs.

And one emerging market where Apple has found great success in a short period of time is China. Cook reportedly acknowledged that Apple has spent "huge energy" in China, and also noted that it is a "classic prepaid market," which would be an ideal candidate for a cheaper iPhone.

The company is also said to be looking to expand its carrier partnerships. Oppenheimer said that Apple has 175 carrier partners, while rival Research in Motion, maker of the Blackberry, partners with 550 carriers.

Cook also said he believes the tablet market will eventually be bigger than the PC market, and that competition for tablets will be even more intense than with smartphones. He also hinted that the company has interesting new things in its product pipeline.

Finally, Oppenheimer also said that Apple's current capital structure is not efficient. He said the company is likely to use its cash to secure supplies of key components, much like the recent secret $3.9 billion deal Apple recently revealed it made with component suppliers.
post #2 of 97
It's not "for the rich". It's for those that value their time more than folks that have the innate need to micro-manage, and system-integrate their lives.
post #3 of 97
While the iPhone nano makes a lot of sense to me, the cost of the phone is not the problem but the data charges that go with a smart phone. And because I find it very unlikely apple is going to release a phone without the appstore ecosystem, this rumor is hard to believe.

IMO the only way an iPhone nano makes sense is if there is a wifi only option, or a data plan that is month to month like the iPad.

In order to do this there would be no need for a different form factor at all, and this should make everyone (besides the carriers) happy.
post #4 of 97
One thing possible is that Apple buying airtime from carriers and use it with the prepaid carrier-free cheaper iPhone just like some company in the UK such as Tesco etc. (bulk airtime purchase in case of Tesco). All parties happy - carrier got their data payment, Apple got to sell more iOS devices and customer can buy, activate and use them cheaper than what currently on offer.
post #5 of 97
Quote:
Originally Posted by sflocal View Post

It's not "for the rich". It's for those that value their time more than folks that have the innate need to micro-manage, and system-integrate their lives.

Its for people who value their time and have more money than most. Even Apple say that.
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post #6 of 97
Less expensive phone. Universal SIM. Dual-mode radios. Carriers bidding for iPhone service. I still think this leads to the possibility of an Apple MVNO service for the iPhone. I realize that this is seemingly at odds with the statement that "the company is also said to be looking to expand its carrier partnerships" but maybe that expansion deals with the bidding process.

On another note, it is good to see that Apple recognizes that hanging on to all that cash is not delivering much value to the company or its shareholders. Prepaying for components is an excellent use of the money although it will probably just increase future gross margins and free cash flow due to discounts afforded Apple. I still think they have plans for a major play.
post #7 of 97
I love my iPhone 4 and I don't have any connectivity issues with ATT. But I do think the service is too expensive. I'm paying $120/month. Granted I have unlimited calling and unlimited data and 200 texts. But man oh man that bill comes around fast every month.

This recession has really kicked me in the nuts.
post #8 of 97
Quote:
Originally Posted by sflocal View Post

It's not "for the rich". It's for those that value their time more than folks that have the innate need to micro-manage, and system-integrate their lives.

It's also for people like my mom who surely don't care about micro-managing or system integrating, but do care about a great looking, easy to use, and fun phone
post #9 of 97
Quote:
Originally Posted by penchanted View Post

I still think they have plans for a major play.

I agree. Any suggestions for them?
post #10 of 97
Quote:
Originally Posted by bcahill009 View Post

IMO the only way an iPhone nano makes sense is if there is a wifi only option, or a data plan that is month to month like the iPad.

Which may be exactly what they have planned. I am surprised Google hasn't gone this route because they already have the VOIP software in place. Dump the cell phone network, stick with wifi.

-kpluck

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post #11 of 97
Quote:
Originally Posted by sflocal View Post

It's not "for the rich". It's for those that value their time more than folks that have the innate need to micro-manage, and system-integrate their lives.

Well, I think the price difference between an iPhone 4 and an iPod touch clearly shows that the iPhone is for those with disposable income and looser wallets and the iPod touch is for the more budget-minded customer.
Prices in Germany, in Apple's own online store (include 19% VAT, prices similar elsewhere in Europe):
- iPhone 4 32 GB, contract-free, unlocked: 739
- iPod touch 32 GB: 299

Yes, the iPhone has a better screen (viewing angle), a cellphone radio and more expensive case but this is Apple clearly segmenting the market and offering similar products to different audiences.
post #12 of 97
Quote:
Originally Posted by bcahill009 View Post

While the iPhone nano makes a lot of sense to me, the cost of the phone is not the problem but the data charges that go with a smart phone. And because I find it very unlikely apple is going to release a phone without the appstore ecosystem, this rumor is hard to believe.

IMO the only way an iPhone nano makes sense is if there is a wifi only option, or a data plan that is month to month like the iPad.

In order to do this there would be no need for a different form factor at all, and this should make everyone (besides the carriers) happy.

I disagree. If the carriers aren't getting their $30/month data fees, that means lower subsidies, and therefore, higher intitial costs if you don't change the hardware (barring gutting the iPhone and selling a mostly empty shell). Or do you really think an iPhone only costs $200?

So if the goal is to provide a cheaper option for customers, and if the carriers don't provide as much subsidy due to lack of data fees, then the phone itself needs to be much cheaper.

Apple demonstrated it's willingness to make a touch device that doesn't have ties to wireless data or the app store when it made the iPod nano.
post #13 of 97
I would definitely buy a cheaper contract-free iPhone nano. I've stuck to my free phone + iPod Touch combination because I haven't wanted to pay for a data plan and I couldn't justify buying an unlocked iPhone.
post #14 of 97
Quote:
Originally Posted by bcahill009 View Post

IMO the only way an iPhone nano makes sense is if there is a wifi only option, or a data plan that is month to month like the iPad.

Isn't the WiFi-only iPhone already here with the iPod touch? And vastly cheaper than an iPhone (739 vs. 299)?
post #15 of 97
Perhaps his slip was in regard to releasing another Mini back at the old $499 price point? They made a big deal at the time about having released a sub-$500 computer, then shortly added $100 to the cost, and then another $100...
post #16 of 97
Perhaps it will be an advanced version of the iPod Touch.

But it sure won't be $200.
post #17 of 97
Quote:
Originally Posted by kpluck View Post

Which may be exactly what they have planned. I am surprised Google hasn't gone this route because they already have the VOIP software in place. Dump the cell phone network, stick with wifi.

-kpluck

You're right. There has to be a big hurdle, otherwise they would have already done it. Obvious guess: Carriers don't want to subsidize a "smart" phone without a 2 yr. data contract.

Therefore Apple needs to come up with a slick solution to make everyone happy. This is where a slightly underpowered iPhone nano that can be sold for an unsubsidized price that consumers can stomach and still allows Apple to keep their margins makes the most sense right now.
post #18 of 97
Quote:
Originally Posted by ispeakinsong View Post

I would definitely buy a cheaper contract-free iPhone nano. I've stuck to my free phone + iPod Touch combination because I haven't wanted to pay for a data plan and I couldn't justify buying an unlocked iPhone.

You don't want to pay for the data plan because the data plan pays for the ~$500 subsidy. As long as contract-free iPhones cost more than twice than equivalent iPod touches, the data plan itself is only part of the problem, the bigger problem might be the huge subsidy these data plans are financing.
post #19 of 97
The reason I don't own a cell phone is the monthly fees are ridiculous. I have no problem with the cost of the phone itself but I just don't want to pay high monthly fees when I barely have a need for a cell phone.

An ipod touch with just a 3G data plan like you can get on an ipad would be perfect for me.

But i'm just not paying $70/month for a phone. I have a VOIP $15/month phone at home. I have a phone at work. I don't have a huge need for a phone in between those two places.
post #20 of 97
Quote:
In his meeting with Sacconaghi, cook reportedly referred to the iPhone as

Was it cook from our ship?
post #21 of 97
Apple has a cheap iPhone. The 3GS is $49.00.
post #22 of 97
I finally pulled the trigger on a pre-paid Android smartphone last week, and now there's talk of a cheap / pre-paid iPhone? Well, they'll have to get it down to $25 a month to get me really upset, I guess. Otherwise, I'm good with my unlimited data plan and 300 minutes.
post #23 of 97
Quote:
Originally Posted by noirdesir View Post

You don't want to pay for the data plan because the data plan pays for the ~$500 subsidy. As long as contract-free iPhones cost more than twice than equivalent iPod touches, the data plan itself is only part of the problem, the bigger problem might be the huge subsidy these data plans are financing.

You're right. In the long run, the data plans merely make up the cost of the subsidy. Unfortunately, until I'm more financially stable, I can't justify the extra cost.

As for the size of the subsidy... Well, I don't know enough to comment on that.
post #24 of 97
Quote:
Originally Posted by archer75 View Post

The reason I don't own a cell phone is the monthly fees are ridiculous. I have no problem with the cost of the phone itself but I just don't want to pay high monthly fees when I barely have a need for a cell phone.

An ipod touch with just a 3G data plan like you can get on an ipad would be perfect for me.

In Germany you can get a data plan starting at 4/month, this only includes 100 MB/month and zero minutes (keep in mind receiving calls is free in Germany), and you can start and stop this every month (like the iPad plans in the US). And if you go to 10/month, you get 1 GB/month instead.

In a competitive market, the data plans are not the problem, the handset price is (which is not that competitive almost everywhere because the carrier subsidies hide the true price to most consumers).
post #25 of 97
Apple products are priced fine ... I am not rich, and own a bunch of Apple products.

I would however like to ask why AT&T charges so much for their service. They have an inferior network, inferior 3G coverage, inferior support and their network is prone to drop phone calls ... for a company who invented communications, they need to get their act together.
post #26 of 97
If Cook is ever going to run the company, he's going to have to learn the Jobsian art of saying very very little. He's already said too much. Does he imply that Apple products have been only for the rich up until now? If so I strongly disagree. Me and my friends are some of the least wealthy people I know, while still having jobs in a major city. We all have Apple gear, and we don't consider the money spent on it "disposable". I think he's falling prey to the negative rhetoric by defending that which requires no explanation. Jobs wold have said it differently, if at all.

Apple products cost more because they are better. period. If they make a lower priced product, it will be inferior, purposefully so. Maybe not in quality (certainly not), but in features and performance.
post #27 of 97
Quote:
Originally Posted by bdkennedy1 View Post

Apple has a cheap iPhone. The 3GS is $49.00.

Well, no. The iPhone 3 GS is €519 (post-taxes) in Europe and probably $450 in the US (pre-taxes), the cell phone provider is just giving you a $400 loan, to be re-paid over two years.

In Germany, some providers go as far and state the loan part explicitly on your bill. Thus, I paid €10/month for a data modem contract + 5€/month to re-pay the loan (for getting the modem at a reduced price) and after two years, the loan was re-paid and I did not have to pay the €5/month extra anymore. Forcing the carriers to be explicit about the loan re-payment part of the monthly bill and forcing them to limit the time period over which the loan was re-paid would make the cell phone business much more open and more competitive.
post #28 of 97
Quote:
Originally Posted by noirdesir View Post

Well, I think the price difference between an iPhone 4 and an iPod touch clearly shows that the iPhone is for those with disposable income and looser wallets and the iPod touch is for the more budget-minded customer.
Prices in Germany, in Apple's own online store (include 19% VAT, prices similar elsewhere in Europe):
- iPhone 4 32 GB, contract-free, unlocked: 739
- iPod touch 32 GB: 299

Yes, the iPhone has a better screen (viewing angle), a cellphone radio and more expensive case but this is Apple clearly segmenting the market and offering similar products to different audiences.

How is it that disposable income comes into play when a consumer has a choice between an iPhone and another smartphone like the Droid? I mean, it's still more expensive data plans compared to non-smartphone plans.
post #29 of 97
Please do a wifi only iPhone. I would gladly pay the full price.

$15/$25/$30 a month for a whole year is a lot of money in the long run.
post #30 of 97
An iPod 3G would be great! That would coincide with the rumors of there being a bigger version iPod. A bigger screen to fit the radio behind.
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post #31 of 97
Quote:
Originally Posted by ihxo View Post

Please do a wifi only iPhone. I would gladly pay the full price.

$15/$25/$30 a month for a whole year is a lot of money in the long run.

In what way would the current iPod touch not qualify as WiFi-only iPhone in your eyes. What would Apple have to add to it for you to consider it a WiFi-only iPhone and thus buy it?
post #32 of 97
Quote:
Originally Posted by sflocal View Post

How is it that disposable income comes into play when a consumer has a choice between an iPhone and another smartphone like the Droid? I mean, it's still more expensive data plans compared to non-smartphone plans.

The whole American centric conversation is getting tiresome. If Apple are going after the PAYG market they are going after China, and Africa, and some of the rest of the world.

A PAYG plan does what it says on the tin . Pay $10 ( or equivalent) and you get $10 worth of data, voice and texts and you control your own usage. As you get lower the phone alerts you ( or your carrier when you are on a call with a beeping sound) and to get online again you top up online, or go to a shop - a newsagent - and get a plastic voucher like an iTunes voucher. Theres a number, you type it in.

So common was this before the iPhone in Europe that it was the most common excuse for missing calls, or not answering. "I was out of credit, or I am running out of credit" - I have to hang up. Running out of credit was more common than battery. But it saved money overall.

Thats a budget plan - it doesnt work with a $600 phone.
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post #33 of 97
Quote:
Originally Posted by sflocal View Post

How is it that disposable income comes into play when a consumer has a choice between an iPhone and another smartphone like the Droid? I mean, it's still more expensive data plans compared to non-smartphone plans.

- Top-Android phones are not much cheaper than the iPhone, they do however sell in smaller numbers (per individual model), thus they make less profit for their manufacturers.
- Android phones usually get cheaper towards the end of their life-cycle (buy one get one free), iPhones do not, yet another reason Apple makes more profit.
- Still, the fact that most customers do not see the full handset price leads to less direct price competition between different Android smartphones compared for example to the MP3-player market.

So in short, most smartphones are a money-maker for their manufacturers, at least those selling in large numbers (Palm might simply not have a high-enough volume to make much money with them) and thus smartphones still are partially targeted at those with a high-enough disposable income.
post #34 of 97
Quote:
Originally Posted by asdasd View Post

So common was this before the iPhone in Europe that it was the most common excuse for missing calls, or not answering. "I was out of credit, or I am running out of credit" - I have to hang up. Running out of credit was more common than battery. But it saved money overall.

Thats a budget plan - it doesnt work with a $600 phone.

Completely agree, though I think you can still receive calls for a limited period (several months) even when your credit is zero or very low (and receiving calls does not cost you any credit).
post #35 of 97
Quote:
Originally Posted by bdkennedy1 View Post

Apple has a cheap iPhone. The 3GS is $49.00.

Unlocked???
post #36 of 97
Quote:
Originally Posted by noirdesir View Post

In what way would the current iPod touch not qualify as WiFi-only iPhone in your eyes. What would Apple have to add to it for you to consider it a WiFi-only iPhone and thus buy it?

How about the ability to make phone calls when not in wifi areas. His point/my ppoint is that there are a lot of people that need to make calls from anywhere but don't need to surf the web from anywhere. For these people a wifi only iPhone is is what we want.

Also, there is a group that wants a 3g iTouch. They want/need web access everywhere but don't need a phone. And they want the form factor of the touch.

My point: stop because so shortsighted/self absorbed. People need devices for different reasons.
post #37 of 97
Quote:
Originally Posted by axual View Post

Apple products are priced fine ... I am not rich, and own a bunch of Apple products.

I would however like to ask why AT&T charges so much for their service. They have an inferior network, inferior 3G coverage, inferior support and their network is prone to drop phone calls ... for a company who invented communications, they need to get their act together.


It's the phone, not the network. I've been saying it for years. I've gone through verizon and AT&T for more than a decade and never had serious issues with either.

Then the iphone comes along and people start blaming the network but never give a thought to the phone.

All cell phones are not created equal and they will have different reception quality.

A number of years ago 4 of us were at the beach, all with AT&T. 4 different phones. 3 of us had no service and one of us had full strength with an old brick of a phone.
At work on break we sit around a table, most with non smart phones and no one has any issues except for the guy on the iphone.

Now my wife has a cheap 4 year old phone with a pre pay plan that gets better reception and quality than any iphone.

I've seen that scenerio played out again and again over the years. They put so much smart into the thing they tend to forget about the phone.
post #38 of 97
Quote:
Originally Posted by bcahill009 View Post

How about the ability to make phone calls when not in wifi areas. His point/my ppoint is that there are a lot of people that need to make calls from anywhere but don't need to surf the web from anywhere. For these people a wifi only iPhone is a dream.

?

How would it make calls when not if wifi areas if it is wifi only.

You want, basically, a 1G phone. Or some such. A phone which can only do voice off wifi. Thats not wifi only.

Quote:
My point: stop because so shortsighted/self absorbed. People need devices for different reasons.

He was asking a reasonable question. An iPod touch is a wifi only iPhone.
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post #39 of 97
Apple already do lower price iPhone options. Right now you get the 8gb iPhone 3GS and when the new iPhone comes out there will be a cheaper version of the iPhone 4.

Anything cheaper would cannibalise iPod touch sales.
post #40 of 97
Quote:
Originally Posted by irnchriz View Post

Apple already do lower price iPhone options. Right now you get the 8gb iPhone 3GS and when the new iPhone comes out there will be a cheaper version of the iPhone 4.

not cheap enough off contract.
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